1. (a) Scope. Pursuant to section 1105 of the Sandy Recovery Improvement Act of 2013, Public Law 113-2, this section establishes procedures for a Dispute Resolution Pilot Program under which an applicant or subrecipient (hereinafter “applicant” for purposes of this section) may request the use of binding arbitration by a panel to resolve disputes arising under section 403, 406, or 407 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5170b, 5172, 5173).

2. (b) Definitions. In this section, the following definitions apply:

   Administrative record means all the documents and materials directly or indirectly considered by the agency and relied upon in making the first appeal determination pursuant to § 206.206. This record may include, but is not limited to, Project Worksheets (all versions) and supporting backup documentation, correspondence, photographs, and technical reports.

   Applicant is used throughout this regulation text and refers to the definition in FEMA's regulations at 44 CFR 206.201(a).

   Arbitration sponsor means the entity or entities FEMA selects to administer the arbitrations requested under this rule.

   Frivolous means the applicant knew or reasonably should have known that its actions lack an arguable basis in law, policy, or in fact.

   Legitimate amount in dispute means the difference between the amount of grant funding sought by the applicant for a project as reimbursable under the Public Assistance Program and the amount of grant funding which FEMA has determined eligible for a project under the Public Assistance Program.

   Non-Federal share means that the project is not 100% federally funded and the applicant or recipient bear a percentage of the costs pursuant to the cost sharing provisions established in the FEMA-State Agreement and the Stafford Act;

   Notice means actual notice that is transmitted to and received by a representative of the applicant either via regular mail, facsimile, or electronic transmission. The notice may be transmitted simultaneously to the recipient and the applicant.

   Panel means an independent review panel referenced in section 1105(b)(1) of SRIA. A panel consists of three members who are qualified to review and resolve disputes under section 1105 of the SRIA.

   Recipient is used throughout this regulation text and it refers to the definition in FEMA's regulations at 44 CFR 206.201(m).

3. (c) Applicability. This section applies to an applicant that wants to request arbitration of a determination FEMA has previously made on an applicant's application for Public Assistance for disasters declared on or after October 30, 2012. The following criteria apply:

   1. (1) The legitimate amount in dispute is equal to or greater than $1,000,000, which sum the FEMA Administrator will adjust annually via a Federal Register Notice to reflect changes in the Consumer Price Index for all Urban Consumers published by the Department of Labor;
   2. (2) The applicant bears a non-Federal share of the cost; and,
   3. (3) The applicant has received a decision on a first appeal, but not a decision on a second appeal, pursuant to § 206.206.
4. (d) Governing rules. The arbitration will be governed by applicable requirements in section 403, 406, or 407 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5170b, 5172, 5173) and the interpretations of those sections of the Stafford Act.
5. (e) Limitations - (1) Date of disaster. FEMA can only consider an applicant's Request for Arbitration of a public assistance grant for disasters declared on or after October 30, 2012.
6. (2) Election of remedies. An applicant can only request arbitration under this section if the applicant has not previously filed a second appeal under § 206.206. If an applicant requests arbitration under this section, the applicant waives the option of filing a second appeal under § 206.206.
7. (3) Final agency action under § 206.206. Arbitration under this section is not available for any request submitted by an applicant for which FEMA issued a final agency action in the form of a decision on a second appeal pursuant to § 206.206.

8. (f) Request for Arbitration.

   1. (1) An applicant who is dissatisfied with a decision on a first appeal may initiate binding arbitration by submitting a Request for Arbitration simultaneously to the recipient, the arbitration sponsor and FEMA.
   2. (2) An applicant must submit the Request for Arbitration no later than 15 calendar days of applicant's receipt of notice of the first appeal decision that is the subject of the arbitration request.
9. (g) Administrative record. Within 15 calendar days of receipt of the Request for Arbitration, FEMA will simultaneously provide a copy of the administrative record to the arbitration sponsor, the applicant and the recipient.
10. (h) Submissions related to arbitration - (1) Recipient recommendation.
11. (i) Within 15 calendar days of receipt of the Request for Arbitration, the recipient must forward to FEMA the name and address of the recipient's authorized representative.
12. (ii) The recipient may submit a written recommendation in support or opposition of the applicant's claim via electronic submission simultaneously to the applicant, the arbitration sponsor, and FEMA.

13. (2) Applicant statement of claim.

    1. (i) Within 30 calendar days of applicant's receipt of the administrative record, the applicant must submit a written arbitration statement of claim that makes the circumstances of the dispute clear. The written arbitration statement of claim must include sufficient detail and citation to supporting documents from the administrative record and specific section references, so that the circumstances of the dispute are clear.
    2. (ii) The applicant will only include issues directly raised and decided in the first appeal and will also cite to applicable statutes, regulations, policies, or guidance in support of their claim.
    3. (iii) The applicant must provide the written statement of claim via electronic submission simultaneously to FEMA, the recipient, and the arbitration sponsor.

14. (3) FEMA response. Within 30 calendar days of receipt of the applicant's statement of claim, FEMA will submit a memorandum in support of its position and the name and address of its authorized representative via electronic submission simultaneously to the arbitration sponsor, the recipient, and the applicant.

    1. (i) Selection of panel. The arbitration sponsor will select the panel. All arbitrators must be neutral, independent, and impartial.

    2. (j) Challenge of arbitrator(s). Any arbitrator may be challenged by a party, if circumstances exist that give rise to justifiable doubt as to the arbitrator's impartiality or independence.

       1. (1) A party challenging an arbitrator will send notice stating the reasons for the challenge within 15 calendar days after being notified of that arbitrator's appointment or after becoming aware of the circumstances that give rise to the party's justifiable doubt as to that arbitrator's impartiality or independence.
       2. (2) When an arbitrator has been challenged by a party, the other party will have the right to respond to the challenge within 15 calendar days after receipt of the notice of the challenge.
       3. (3) The other party may agree to the challenge and in such circumstances the arbitration sponsor will appoint a replacement arbitrator. If the other party does not agree to the challenge and the challenged arbitrator does not withdraw, the decision on the challenge will be made by the arbitration sponsor. If the arbitration sponsor orders the withdrawal of the challenged arbitrator, the arbitrator sponsor will appoint a replacement arbitrator.

    3. (k) Preliminary administrative conference. The panel will hold a preliminary administrative conference with the parties and/or representatives of the parties within 15 calendar days of the panel's receipt of FEMA's response to the applicant's statement of claim. The panel and the parties will discuss the future conduct of the arbitration, including clarification of the disputed issues, request for disqualification of an arbitrator (if applicable), and any other preliminary matters. The panel will provide the parties with the opportunity to request a hearing and, if requested,

       1. (1) A party must request a hearing to the panel no later than the time of the preliminary administrative conference.
       2. (2) If a hearing is requested, the panel will set the date and place of any hearing and set a deadline for the parties to exchange witness lists. Within 10 calendar days of the preliminary conference, the independent review panel will issue a scheduling order which memorializes the matters heard at the conference and the upcoming deadlines.

    4. (l) Jurisdictional and arbitrability challenges. Any party may raise a jurisdictional or arbitrability challenge at any time during the arbitration.

       1. (1) When jurisdiction or arbitrability has been challenged by a party, the other party will have the right to respond to the challenge within 15 calendar days after receipt of the notice of the challenge.
       2. (2) The panel may suspend or continue the arbitration proceedings during the pendency of the challenge. The panel must rule upon the challenge prior to any hearing in the matter and will dismiss any matter that is untimely or outside the panel's jurisdiction. The panel's dismissal will be with prejudice and there will be no further arbitration of the issue giving rise to the Request for Arbitration.
    5. (m) Hearing - (1) Request for hearing. The panel will provide the applicant and FEMA with an opportunity to make an oral presentation on the substance of the applicant's claim, by telephone conference, or other means during which all parties may simultaneously hear all other participants.
    6. (2) Location of hearing. If an in-person hearing is requested and authorized by the panel, it will be held at a hearing facility of the panel's choosing.
    7. (3) Conduct of hearing. Each party must present its position at the hearing through oral presentations by witnesses the party has identified pursuant to the deadline and terms established by the panel. The presentations will only relate to those issues raised and decided in the first appeal and only reference documents included in the administrative record.
    8. (4) Time limits. The panel should hold the hearing within 60 calendar days of the preliminary conference.
    9. (5) Postponement or continuance. The panel may postpone or continue a hearing upon agreement of the parties, or upon request of a party for good cause shown. Within 10 calendar days of the date the panel grants a party's request for postponement or continuance, the panel will notify the parties of the rescheduled date of the hearing.
    10. (6) Transcript of the hearing. A party may specifically request and arrange for a written transcript of the hearing at its own expense.
    11. (n) Standard of review. The panel will only set aside the agency determination if it is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. In the case of a FEMA finding of material fact adverse to the applicant on the first appeal, the panel will only set aside or reverse such a finding if the finding was clearly erroneous.
    12. (o) Ex parte communications. No party will have any ex parte communication with the arbitrators unless the parties agree otherwise. If a party violates this provision, the panel will ensure that a memorandum of the communication is included in the record and that an opportunity for rebuttal is allowed. The panel may require the party who engages in an unauthorized ex parte communication, to show cause why the issue should not be resolved against it for the improper conduct.

    13. (p) Decision - (1) Time limits.

        1. (i) The panel will issue a written decision within 60 calendar days from the conclusion of the hearing.
        2. (ii) If a hearing was not requested and approved, the panel will issue a written decision within 60 calendar days from the preliminary administrative conference.
        3. (2) Form and content. The panel will issue a reasoned decision that includes findings of fact and conclusions of law that will set forth the reasons for the decision, with citations to the record or testimony taken during the hearing under this section which support the panel's disposition of a decision. The majority decision of the panel will be in writing, signed by each member of the panel in agreement with the decision. A dissenting member of the panel may issue a separate written dissent that will set forth the reasons for the dissent.
        4. (3) Finality of decision. A decision of the majority of the panel will constitute a final decision, binding on all parties, but will not be binding precedent for any future arbitration hearings or FEMA administrative decisions. Final decisions are not subject to further administrative review. Final decisions are not subject to judicial review, except as permitted by 9 U.S.C. 10.
        5. (4) Delivery of decision. The panel will deliver its decision via simultaneous electronic submission to each party or its authorized representative.
    14. (q) Costs - (1) Fees. FEMA will pay all fees associated with the independent review panel, including arbitrator compensation, and the arbitration facility costs.
    15. (2) Expenses. Expenses for each party will be paid by the party who incurred the expense.
    16. (r) Frivolous requests. If, upon notification by FEMA, or on its own initiative the panel determines the applicant's Request for Arbitration to be frivolous, the panel will deny the Request for Arbitration and direct the applicant to reimburse FEMA for reasonable costs FEMA incurred, including fees and expenses.
    17. (s) Deadline. FEMA cannot consider an applicant's request for review by a panel under this section if the request is made after December 31, 2015. However, pursuant to this rule, FEMA will continue to process and finalize any proper request made on or before December 31, 2015.

[78 FR 49961, Aug. 16, 2013, as amended at 82 FR 43, Jan. 3, 2017]