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Arbitration Vs. Litigation In Forex Trading: Guidance From Tennessee Attorneys – By Brian O’Shea and Stuart Davis |2023-01-14T08:35:50-05:00 December 21, 2022|Practice Areas: Class Action|Topics: Arbitration, Coinbase, Electronic Funds Transfer Act|
In 2021, two plaintiffs filed a separate class action lawsuit against Coinbase, one of the largest cryptocurrency exchanges in the US. Coinbase moved to compel arbitration in all cases because both plaintiffs signed a Coinbase User Agreement ordering any dispute to be arbitrated. The United States District Court for Northern California denied arbitration in both cases. Coinbase appealed the denial of arbitration and moved to stay the original class actions. The District Court again denied Coinbase’s motion and allowed the arbitration appeal and class action litigation to proceed concurrently.
Arbitration Vs. Litigation In Forex Trading: Guidance From Tennessee Attorneys
The Ninth Circuit affirmed the District Court in both cases. His ruling highlighted a nine-to-three federal circuit split, in which some jurisdictions automatically stay the basis of litigation during an arbitration appeal, while others, like the Ninth Circuit, do not. Coinbase petitioned the United States Supreme Court to resolve the circuit split and decide whether federal law requires an automatic stay of underlying litigation when a party appeals a denial of arbitration.
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The Supreme Court has agreed to hear the case, and its decision has significant financial implications for businesses that try to use arbitration to avoid costly class action litigation. The rule is, in general, that there is a national policy that favors arbitration and the enforcement of arbitration agreements as they are written. Not only is public policy strong in favor of arbitration to keep disputes out of court, but arbitration agreements are traditionally enforced just like any other contract—meaning as written.
Without an automatic stay, businesses in many jurisdictions, including the Ninth Circuit, must incur the cost of appealing a denial of a motion to arbitrate, while simultaneously litigating the original action class. Arguably, this defeats the entire purpose of arbitration. This case could change that dichotomy. Not only is this a case that any employer or business owner should be watching, but, depending on how the Court rules, this could be a dominant case that people who seeking to enforce arbitration agreements, while avoiding the time and expense of litigation, cited for years. The demand for a dispute resolution system that can deliver enforceable judgments that are certain, cost-effective, speedy and impartial is due to the continuous increase in the number of transnational commercial activities. In the absence of an international authority with universal jurisdiction for the settlement of international commercial disputes, the only recourse is to rely on state-based jurisdiction, i.e. litigation, or arbitration. Given the limitations of national courts in addressing the needs of global commerce –  e.g. inadequate or even corrupt legal frameworks in underdeveloped jurisdictions, lack of knowledge and knowledge by foreign parties of the laws, enforcement of foreign awards – arbitration is long. be the preferred method of resolving disputes arising from international commercial dealings. Arbitration of commercial disputes has been used since the beginning of commerce,  but as international trade relations have grown enormously since the beginning of the 19th century.
Century, the contemporary arbitration systems were developed to eliminate the limitations of global commercial litigation: costs and speed, declaration of jurisdiction by national courts, choice of law, choice of forum, ignorance of foreign jurisdictions and enforcement of non-domestic judgments. 
Arbitration is a non-judicial mechanism for public and private dispute resolution to which parties agree as an alternative to litigating their disputes in national courts. Therefore, arbitration arises out of contract. Although the voluntary submission of disputes to a neutral third party is by no means a recent phenomenon,  the modern incarnation of arbitration has many distinguishing characteristics that have contributed to its rapid growth. In particular, unlike adjudication, arbitration gives parties the desired flexibility to shape the system under which their disputes are to be resolved. Due to the growth of arbitration in all areas of civil dispute resolution, however,  it is difficult to attribute its attractiveness to a single factor. Compared to its judicial counterpart, arbitration proceedings are consensual and customizable, possibly confidential, likely to be faster, more efficient and more cost-effective. Furthermore, arbitral awards are final and enforceable.
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As a means of resolving civil disputes, arbitration may seem like a world apart from the realm of criminal law. After all, an arbitrator is not a judge, and jurisdiction over criminal sanctions lies entirely in the hands of national courts. But as demand for arbitration increases, particularly in international commerce, arbitrators are facing civil disputes tainted with financial crimes such as tax evasion, theft, corruption, extortion and money laundering. The interaction of financial crimes and arbitration gives rise to many complex legal issues, eg, the burden of proof, evidentiary requirements, applicable criminal laws, enforcement, and judicial review.  Contracts tainted by financial crimes put arbitrators in a difficult predicament. On the one hand, arbitrators have certain duties in relation to parties and the process; on the other hand, arbitrators have certain responsibilities as arbitrators, as members of the legal community and as individuals. So what are the legal and ethical obligations of arbitrators when faced with criminality? Put another way, should arbitrators be guided by the enforcement of the public policy against fraudulent transactions or the public policy in favor of maintaining arbitration agreements?
Money laundering is one of the crimes faced by arbitrators when deciding international commercial disputes. It has become the subject of increased international scrutiny and criminalization in recent years and is considered a crime in most jurisdictions due to its destructive impact on commerce and society in general.  Despite the fact that many national and international instruments have been implemented to prevent it, it is still widely practiced. The definition and scope of money laundering depends on the national laws or international conventions under which it is considered a crime. Activities that constitute money laundering are carefully defined in national laws and multilateral guidelines. The United Nations definition is found in the Vienna Convention. Although it is not easy to find a universal definition of money laundering, the common feature of all money laundering schemes is the purpose of concealing sources of income derived from criminal activities.
There are various cases where money laundering is referred to an arbitration tribunal. Firstly, and more often, it is when a party raises the defense of money laundering against contract enforcement. In such a case, the party alleging money laundering refuses to fulfill its contractual obligations in relation to the other party’s alleged criminal conduct in relation to the contract. Another possibility is when the dispute itself is part of a wider money laundering scheme. That is to say, there is no real dispute between the parties, and the arbitration tribunal is used as a tool to hide and legitimize the criminal sources of assets. In these cases, depending on the role of the arbitrator, two different situations may arise. First, the arbitrator is being used, despite her knowledge, to make an arbitral award and thereby legalize criminal activity. It could also be the case that the arbitrator is acting as an accomplice. Sham disputes in which parties seek to oust the arbitrator involve the following steps: the perpetrators of the “alleged” offence, usually establish two separate companies. The companies then engage in a commercial enterprise, which involves the transfer of certain other goods or the performance of services often at unreasonably high/low prices (compared to the market value of similar products or services). The original contract contains an arbitration clause, which prevents the judicial system from deciding a dispute that may arise from the contract. After that, they generate a fake dispute and often act diligently to prepare the necessary documents to support their positions. As stated earlier, such agreements are completely false and often specify prices that are too unreasonable. When the arbitrator issues an enforceable award, the process is complete. The defendant will then proceed to transfer funds of illicit origin to the claimant’s bank account, thereby legalizing the criminal activity. 
Despite the global success of arbitration, there is no universally recognized set of ethical standards governing the conduct of arbitrators,  perhaps due to the private and autonomous nature of arbitration. institutions, national legislations and courts,  e.g., the duty of privacy, the duty to disclose conflicts of interest,  the duty to act with competence and diligence, and the duty of impartiality and fairness. ] These duties may refer to parties, their contract, their arbitration institutions, courts or governing national or international public policy. Ethical and legal duties arise from various sources, eg legislation, conventions or institutional rules. It is also possible that individual duty has both legal and ethical roots. In the absence of a universally binding body of criminal law, the problem of what an arbitrator should do when faced with money laundering cases arises from a conflict between the arbitrator’s legal and ethical duties to the parties under the arbitration agreement money in international commercial disputes. , and other duties arising out of public policy concerns in combating criminal activities
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