Judicial Review of Commercial Arbitration Awards in Puerto Rico: Charting the Supreme Court of Puerto Rico’s Conflicted Interpretation of the Federal Arbitration Act
Lcdo. Robert A. Fleming
This article examines how the Supreme Court of Puerto Rico has addressed judicial review of commercial arbitration awards arising from disputes in interstate commerce under federal and state arbitration law.
Commercial arbitration agreements are private contracts that allow parties to structure how to manage their contractual disputes employing arbitrators that operate under specifically delegated powers. It is a widely used and preferred method of conflict resolution promoted by a strong national policy that both federal and state laws enforce. The two parties to the dispute submit their grievance —voluntarily— to a third party recognized by both as impartial and capable of deciding fairly, who hears the respective positions and resolves the conflict through an award that is final and binding. The focus is to arrive without undue delay at a final hearing in which each party presents its evidence and arguments before an impartial judge, without excessive formality.
To protect parties from erroneous decisions, some arbitration agreements provide for appellate review through the courts or selected arbitral platform. While parties are free to draft their own arbitration arrangements, they do not have the same degree of discretion to commit the courts to review the awards in the manner chosen. As we will discuss ahead, judicial intervention post-award will depend on the applicable law.
Commercial arbitration agreements in Puerto Rico are regulated by the Federal Arbitration Act (“FAA”) (if the controversy submitted for decision arises out of interstate commerce) and by the local “Law to Authorize the Celebration of Arbitration Agreements in Puerto Rico” also known as the “Arbitration Act” (“PRAA”). In both statutes the provisions pertaining judicial review are strikingly similar. However, the Supreme Court of Puerto Rico (“SCPR”) has carved out critical differences between them. In this article we will review these differences and discuss how they ultimately influence the results of arbitration awards of disputes affecting interstate commerce.
Understanding the distinctions of the FAA and the PRAA, as interpreted by the SCPR, is the focus of this article; particularly matters on judicial review of awards. Part I and II provide an overview of both the FAA and the PRAA. Part III examines how the SCPR’s has historically interpreted both laws and how these decisions have shaped the scope of judicial review of awards by the SCPR. Part IV provides a perspective of both laws from the federal bench in Puerto Rico and the United States Court of Appeals for the First Circuit.
I. OVERVIEW OF THE FAA
The FAA was enacted in 1925 “[t]o overcome judicial resistance to arbitration,” and to declare “a national policy favoring arbitration of claims that parties contract to settle in that manner . . . .”
The Act as interpreted by the U.S. Supreme Court stands on the constitutional authority of Congress under the Commerce Clause. Based on a national policy favoring arbitration, it makes dispute resolution agreements “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”
The Supreme Court has repeatedly held that the FAA is not some procedural law to be applied in federal court but rather a “body of federal substantive law of arbitrability, applicable to any arbitration agreement evidencing a transaction in fact ‘involving commerce.’ ” However, the purpose and expansion of the statute has been the object of considerable debate within and outside the Court.
The Act is succinct and comprising of 16 general provisions, mostly dealing with procedural aspects of enforcing arbitration. A brief discussion of its sections follows next.
A. Coverage of the FAA
Section 1 of the FAA define the areas legislated by Congress. These are maritime and commercial matters.Excluded from these matters are “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” This exclusion has been interpreted to only apply to employment contracts of transportation workers under employment or independent contractor agreements.
Section 2 of the FAA is the law’s core mandate. It states that:
A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract. 
Section 2 encapsulates the substantive federal policy regarding the enforceability of arbitration agreements, requiring courts to force what the parties agreed to and “to place such agreements upon the same footing as other contracts.”Section 2 applies where there is “a contract evidencing a transaction involving commerce” regardless whether the parties considered an interstate commerce connection. The phrase “involving commerce” has a broad meaning and is “the functional equivalent of ‘affecting [commerce] . . .’ mean[ing] a full exercise of constitutional power.”
Being a federal law, all sections of the Act are applicable in federal courts, but what about state courts? The Supreme Court has stated that the fundamental substantive provisions of the FAA, sections 1 and 2 are equally binding on state and federal courts. This majority view has evolved over time but is not shared by all members of the Court.What other sections if any apply to states is unsettled. Still, the fact that the Supreme Court has relied on section 2 alone to scrutinize numerous substantive and procedural laws for preemption tells us that the FAA reaches far beyond its express provisions.
As with any other state, the FAA applies in Puerto Rico when the transactions subject to arbitration affect interstate commerce. Thus, local courts are required to follow the provisions of the FAA and enforce arbitration contracts agreed by the parties like any other agreement.
B. The FAA and Preemption
The doctrine of federal preemption is based on the supremacy of the U.S. Constitution and federal law. It arises when a valid federal law conflicts with a state law causing it to supersede the inconsistent state law.
The issue of preemption is relevant to discuss judicial review because arbitration most often than not occurs in state courts. For example, an arbitration agreement may be unenforceable under local law based on public policy considerations, but that same public policy might be preempted and invalidated under the FAA.
The “Supremacy Clause forbids state courts to dissociate themselves from federal law because of disagreement with its content or a refusal to recognize the superior authority of its source.” Federal law can expressly preempt state law when it includes explicit preemptive language. It can also implicitly preempt state law when the federal statute implicitly reflects congressional intent to preempt.
Implied preemption takes various forms. It is considered “field preemption” when it arises from a prevalent scheme of federal regulations implicitly excluding supplementary state regulation or when states attempt to regulate a field where there is clearly a dominant federal interest. Under such circumstances, “the scheme of federal regulation is so pervasive as to make reasonable the inference that Congress left no room for the states to supplement it.” The Supreme Court’s cases examining express and implied preemption focus on Congress’ intent.
State law that interferes with federal goals is subject to “conflict preemption” which can manifest itself in two subcategories. When the compliance to both state and federal law is not possible, the interference is considered “impossibility preemption.” When a state law poses an obstacle to the “full purposes and objectives” of Congress the conflict preemption is viewed as “obstacle preemption”.
Obstacle preemption looks at the text of the law, its structure and legislative history to ultimately measure congressional intent. A state law that impedes the vindication of a federal right would be an example of obstacle preemption.
The text of the FAA does not expressly preempt state law “nor does it reflect a congressional intent to occupy the entire field of arbitration.” Furthermore, the legislative history of the FAA has been “not without ambiguities” and subject to conflicting interpretations.
Despite these difficulties, the Supreme Court has construed the statute to be based upon the inherent authority of Congress to control interstate commerce and admiralty. For the Court, section 2 is a congressional declaration of a national policy favoring arbitration that “withdrew the power of the states to require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration.” The Court did not see any indication in the FAA that the federal mandate enforcing arbitration be subject to any limitation under state law. It also reasoned that as an exercise of the Commerce Clause, the substantive rules of the Act applied to both federal and state courts.
States have their own arbitration laws, many more comprehensive than the 16 sections of the FAA and they coexist. Furthermore, section 2 of the FAA acknowledges the role of the states in determining the validity of an arbitration agreement based on “such grounds as exist at law or in equity for the revocation of any contact.” Thus, section 2 “explicitly retains an external body of law governing revocation . . ., state law, therefore is applicable to determine which contracts are binding.” Hence, an arbitration agreement can be invalidated “based on generally applicable contract defenses like fraud or unconscionability, but not on legal rules that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue.”
Given these considerations, the preemptive effect of the FAA seems to fall more squarely within the category of obstacle preemption as the law is often analyzed to determine whether state law stands as an obstacle or would undermine the purposes, objectives, goals, and policies of the FAA. This includes displacing state law that prohibits the arbitration of a particular type of claim, or that is inconsistent with the FAA’s provisions and supersedes attempts by such courts to apply state statutes that invalidate arbitration agreements or do not hold them in equal footing to other contracts.
Not all sections of the FAA have a preemptive effect. As we will discuss next, besides the substantive provisions of section 2, the other sections generally pertain procedural rules applicable in federal courts.
C. Enforcing the Agreement to Arbitrate
At the front end of the arbitral dispute and depending on the facts, in appropriate cases, a party benefited by an arbitral award, may request a federal court to enforce the arbitration agreement under sections 1 and 2 of the FAA or if already facing a federal proceeding, request to stay the litigation to compel arbitration. When requesting the stay, the court first examines whether the agreement to arbitrate is a valid contract under section 2 and whether under section 3 the issue can be referred to arbitration. This section provides:
If any suit or proceedings be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which suit is pending, upon being satisfied that the issue involved in such suit or proceeding is preferable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default proceeding with such arbitration.
Compelling arbitration in federal court is done under section 4. Under this procedure, the aggrieved party establishes both, the existence of a written agreement to arbitrate and the refusal of the opposing party to comply. Once the court finds that an agreement to arbitrate exists and the refusal is unwarranted, it shall issue “an order directing that such arbitration proceed in the manner provided for in such agreement.”
These four sections “are integral parts of a whole” meaning that enforcement can be invoked when there is a “written provision in any maritime transaction” or a “contract evidencing a transaction involving commerce [to be settled by arbitration].”
Sections 5 through 7 are miscellaneous provisions to assist in the arbitration process. Section 5 provides for a court mechanism to appoint an arbitrator when agreement fails to do so. Section 6 provides guidance on general motion practices before the courts and section 7 deals with compelling attendance of witnesses before arbitrators. Section 8addresses special proceedings relating to admiralty and section 9 includes a procedure to request an order to confirm an award.
D. Judicial Review of The Award
Arbitration “is a matter of consent, not coercion, and parties are generally free to structure their arbitration agreements as they see fit.” The FAA’s purpose is to enforce the parties’ private agreements while containing and, ultimately, reducing the authority and role of the courts in the process execution stage. Thus, judicial review under the FAA is expedited but limited to specific circumstances.
Sections 9 through 16 are the back-end provisions that deal with issues post-arbitration award. Depending on the results of the award, a party may file for a judicial decree to confirm vacate or modify/correct the award.
A party may request to vacate the award pursuant to section 10 based on circumstances that, broadly involve misconduct, and not mistake by the arbitrator. The prescribed acts of misconduct require that the award is “procured by corruption, fraud, or undue means;” and shows “evident partiality or corruption in the arbitrators, or either of them.” Other grounds for revocation are likewise based on misconduct —“where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced.” Finally, an arbitral award may be vacated “where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.”
Section 11, allow awards to be modified or corrected in limited matters such as mathematical calculations, erroneous description of things and people that are obvious, when matters not submitted for consideration have been resolved or when they are imperfect in matter or form.
In Hall Street Assocs., LLC v. Mattel, Inc., the Supreme Court faced the question of whether private parties could contractually agree to extend the scope of judicial review of an arbitration award beyond the grounds listed in sections 9, 10, and 11 of the FAA. This was a case that originated in federal court. At the time, the circuits were split over the exclusiveness of these statutory grounds, “with some saying the recitations [were] exclusive, and others regarding them as mere threshold provisions open to expansion by agreement.”
The arbitration agreement between the Hall Street parties included the following clause, “[t]he court shall vacate, modify or correct any award: (i) where the arbitrator’s findings of facts are not supported by substantial evidence, or (ii) where the arbitrator’s conclusions of law are erroneous.”
The Court held that parties could not “supplement by contract” how would an award be reviewed by the courts beyond the narrow and exclusive parameters of sections 10 and 11 of the FAA. Although the parties enjoyed considerable freedom incorporating procedures and tailoring arbitration arrangements, these rights end once the arbitration process was complete. This is the stage where the award is rendered, and the case reaches the federal courts.
The Court reasoned that the FAA offered “just the limited review needed to maintain arbitration’s essential virtue of resolving disputes straightaway. Any other reading opened the door to the full-bore legal and evidentiary appeals that would ‘rende[r] informal arbitration merely a prelude to a more cumbersome and time-consuming judicial review process.’ ”
The Court made it clear that this limitation was exclusive to the FAA and that the decision did not resolve whether other possible avenues for expanded judicial review were viable:
In holding that §§ 10 and 11 provide exclusive regimes for the review provided by the statute, we do not purport to say that they exclude more searching review based on authority outside the statute as well. The FAA is not the only way into court for parties wanting review of arbitration awards: they may contemplate enforcement under state statutory or common law, for example, where judicial review of different scope is arguable. But here we speak only to the scope of the expeditious judicial review under §§ 9, 10, and 11, deciding nothing about other possible avenues for judicial enforcement of arbitration awards.
Although Hall Street held that the FAA could not be modified contractually, it did not specifically answer whether agreements opting out of the FAA were enforceable. The dicta on “other possible avenues” leaves unanswered the question of whether the FAA can coexist with alternate scopes of judicial review that would be otherwise unacceptable under the FAA.
Professor Thomas Carbonneau questions the implication of the dicta and whether it fails to conform with the federal preemption doctrine. He argues that “[s]tate law cannot serve as a parallel regulatory mechanism under which significant provisions of federal arbitration law can be avoided or ignored.”
In holding that the Arbitration Act preempts a state law that withdraws the power to enforce arbitration agreements, we do not hold that §§ 3 and 4 of the Arbitration Act apply to proceedings in state courts. Section 4, for example, provides that the Federal Rules of Civil Procedure apply in proceedings to compel arbitration. The Federal Rules do not apply in such state court proceedings.
II. OVERVIEW OF THE PUERTO RICO COMMERCIAL ARBITRATION ACT (PRAA)
Enacted on May 8, 1951, the PRAA is based substantially on the FAA. Many of its key provisions are a translation of the federal law. Under the PRAA, two or more parties may agree in writing to submit to arbitration any existing or future dispute and “[s]uch an agreement shall be valid, requirable, and irrevocable except for the grounds prescribed by law for the reversal of an agreement.”
B. Enforcing the Agreement to Arbitrate
The PRAA provides a procedure to initiate the arbitration of a dispute beginning with a notice of intent to arbitrate. Under section 11 the party seeking arbitration “shall serve on the other party, whether personally or by registered mail a written notice of his intent to arbitrate.” The notice shall “state that, unless within twenty (20) days after notice has been served, the party on whom said notice was served, in turn serves a motion to stay the arbitration, said party shall thereafter be barred from promoting a dispute concerning the existence or validity of the agreement, or the nonperformance thereof.”
If court proceedings are initiated, a party to the agreement may file a motion to stay the process until arbitration is completed according to the agreement. A party may also move the court for an order compelling the other to resort to arbitration if it refuses to do so or is being negligent in its contractual obligations. All applications for relief are filed in the Court of First Instance in whose territorial jurisdiction the parties or any of them reside.
C. Confirming the Award
At any time within the year following the award, the parties may request from the court an order confirming the award. Unless the award is reversed, modified, or corrected, under articles 23, and 24, the court shall issue the confirmation. The fact that no motion has been filed for confirmation shall not undermine the validity of an award.
D. Judicial Review of the Award
Like sections 10 and 11 of the FAA, the PRAA provides an expedited judicial review process to revoke or modify an award under limited situations. Article 22 lists the specific reasons: when the award is obtained through corruption, fraud, or other improper means; when there was partiality or obvious corruption of the arbitrators; when the arbitrators act wrongly by refusing to postpone the hearing after justifiable cause is shown or by refusing to hear relevant and material evidence to the dispute, or when they incur in any error that harms the rights of either party;when the arbitrators exceed their functions or when the award issued does not resolve the controversy submitted in a final manner; and in cases where there was no valid arbitration submission or agreement and the procedure was initiated without filing the notice of intention to arbitrate, or the motion to force the arbitration.
Articles 22(a) and (b) are remarkably similar if not identical with sections 10(1) and (2) of the FAA. Article 22(c) is the equivalent to section 10(3) of the FAA except that the local counterpart provides for arbitrator “error” instead of “misconduct” or “misbehavior”.
Article 22(d) is the equivalent to section 10(4). Both provisions call for vacatur when the arbitrator exceeds its powers or a final award is not entered (stated as “go[ing] beyond their function” in article 22(d)) or when the award does not finally and definitively decide the dispute submitted (stated in section 10(4) of the FAA as “or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.”).
Under Article 23 of the PRAA, the award may be modified or corrected when there was obvious miscalculation as to the figures, or obvious error in the description of any person or property; when the arbitrator has resolved matters not submitted for consideration; and when the award is imperfect in matter or form without affecting the merits of the dispute.
Article 23 is practically identical with section 11 of the FAA with one exception. Under the FAA a matter resolved that was not submitted for consideration is not a basis to correct or modify the award if it is a “matter not affecting the merits of the decision upon the matter submitted.” The PRAA does not have such qualifier.
If the term within which the award must be issued is not set in the arbitration agreement, it shall be awarded within thirty (30) days after the end of the hearing, and any award issued after the expiration of said thirty (30) days shall not have legal effect, unless the parties mutually agree to extend the term within which it may be issued or ratify it when it is issued after the expiration of the thirty (30) day term.
A notice of the motion to revoke, modify, or correct the award under the PRAA shall be made to the opposing party or his attorney within three (3) months following the delivery of a copy thereof to the party or his lawyer.
III. HOW THE SCPR HAS INTERPRETED THE FAA, THE PRAA AND ITS IMPACT ON JUDICIAL REVIEW
Given the nature of commerce in Puerto Rico and the interpretation of the Commerce Clause, most of the arbitration agreements would likely fall under the FAA’s jurisdiction. Hence, we would expect the FAA to be a permanent and important component of the opinions of the SCPR on the matter. As we will discover, however, the SCPR has constricted the role of the FAA and downplayed its importance in favor of the PRAA and local rules of contract construction.
We examined a broad category of cases predating the enactment of the PRAA up until 2019. Most can be grouped under three general categories. The first and largest group consists of construction disputes. The cases discussed are Autoridad Sobre Hogares de Puerto Rico v. Tribunal, Rivera v. Samaritano & Co., Febus v. MARPE Construction, U.C.C.P.R. v. Triangle Engineering Corp., Crufon Construction Corp. v. Aut. Edif. Pubs.,Municipio de Mayagüez v. Edgardo Lebrón, VDE Corporation v. F & R Contractors, Inc., Constructora Estelar v. Aut. Edif. Pubs., and H.R., Inc. v. Vissepó & Diez Construction.
The second category of cases include local distributors filing civil action against their principals under Law No. 75, also known as the Puerto Rico Dealers’ Act (“Dealers’ Act”). These are, McGregor-Doniger, Inc. v. Tribunal Superior, Walborg Corp. v. Tribunal Superior, World Films v. Paramount Pictures Corp., and L.M. Quality Motors, Inc. v. Motorambar.
The third group of cases considered consists of labor-employment cases where the validity of an arbitration clause or award is challenged in court. The cases are JRT v. N.Y & P.R. Steamship Co., Medina v. Cruz Azul de Puerto Rico, Quiñones v. Asociación, and Méndez v. Carso Construction.
Other cases reviewed include Méndez v. Nieves, involving a dispute between business partners subject to an arbitration agreement; Paine Webber v. Service Concepts, Inc. relating to a collection claim filed by a financial institution; and Vivoni v. Ortiz, involving the dissolution of a conjugal partnership.
A. Cases Pertaining Construction Contracts
Autoridad Sobre Hogares de Puerto Rico v. Tribunal, is a 1961 case dealing with a government agency and a contractor dispute relating to the scope and payment of portions of a construction project. Under the terms of the arbitration clause, the award issued was to be conclusive. The government challenged the award in court alleging numerous errors of fact and law. The contractor requested its confirmation. The SCPR upheld the decision of the lower court. It ruled that because the parties had not required the award to conform to law, the arbitrators were also not obliged to issue their awards in accordance with law, unless expressly agreed otherwise. Hence, the courts could not review it for error in the interpretation of the facts or the law and the only grounds for revocation were the ones expressly provided under the PRAA. In reasoning, the Court relied on Junta v. New York & Porto Rico Steamship(a labor arbitration decision that is the subject of further discussion ahead) stating that:
We adopted in the cases of Ríos and Junta v. New York & Porto Rico Steamship, by way of doctrine a govern among us, those principles relating to effect of the arbitration award and the scope of its review legal permissible in force in the different states as well as in federal jurisdiction, both under the common law as under positive legislation on arbitration procedures, these principles by not being controverted over time and for so long evident, they have become on this particular the applicable law, general, and indisputable acceptance.
Besides implementing Porto Rico Steamship, the SCPR attempted to infuse more credence to its reasoning citing a considerable number of federal and state cases substantiating the “indisputable acceptance” of “these principles” adopted. A review of these cases disputes this assertion. While there are several principles involved in Porto Rico Steamship, one that clearly does not show universal acceptance is the adoption of the exception of “conforming to law.”
The difficulty with applying the decision of Porto Rico Steamship is two-fold. First, the SCPR relied on a labor arbitration case that was filling a void since there was no labor arbitration law. Second, by the time Autoridad Sobre Hogares was decided, the legislature had already enacted a commercial arbitration law that specifically excluded labor arbitration. The decision is contradictory in the sense that it states that the only grounds for judicial review are the ones specifically enumerated in 22 and 23 of the PRAA, which incidentally the SCPR states are analogous to sections 10 and 11 of the FAA (mentioned perfunctory). At the same time, it carves out an exception not contemplated in either law based on a case pertaining a collective bargaining dispute between a union and an employer.
The ‘conform to law’ exception to limited judicial review was enforced in Rivera v. Samaritano & Co. In this 1979 case, a construction company requested the dismissal of an action to vacate an arbitration award on the grounds that the court did not have jurisdiction to review whether the award conformed to law because Article 22 of the PRAA limited the grounds for revocation of an award and they did not include among them errors of law.
The construction company further argued that this limitation applied even if the parties had agreed that the award was to be resolved in accordance with the law because the law limited revocation of awards to extremely specific circumstances. The court did not buy the argument and turned once more to Porto Rico Steamship and Autoridad Sobre Hogares v. Tribunal Superior for support.
The SCPR applied the labor decisions to commercial disputes arguing that the distinction in the source of regulation of labor and commercial arbitration did not alter the common contractual nature of both institutions. Since both types of arbitration originated from an agreement, the arbitrators of either were obliged to respect what had been agreed. Otherwise, the courts were free to give effect to the will of the parties. For the court, denying the binding force of the submission agreement would nullify the will of the parties which was contrary to Autoridad Sobre Hogares that had adopted the ‘conform to law’ exception first enunciated in Porto Rico Steamship.
Samaritano & Co. emphasized the parties’ freedom to contract and the public policy seeking to enforce agreements into which parties had entered. Yet, the decision fails to reconcile the plain meaning of the PRAA which is at odds with the liberty to fashion expanded judicial review. Why then even qualify and bother to specify the reasons for vacatur in a law, if the parties could contract at will?
While detailed facts of the transaction are limited, we know that Samaritano & Co. involved a construction dispute obviously affecting interstate commerce. Over 10 years had passed since the U.S. Supreme Court decision of Prima Paint v. Flood & Conklin Mfg. Co. and the substantive aspects of the FAA were beginning to develop along with its enforceability in both state and federal courts. Yet, while the SCPR surveyed common law decisions, labor cases, laws from other states, and even arbitration statutes from Spain, not once did the court discussed the FAA or its caselaw.
The 1994 Febus v. MARPE Construction decision is another ‘conform to law’ case. During litigation, the parties agreed to arbitrate their disputes. After the award was issued, the dispute continued in court. The judge decided, based on Article 23 of the PRAA, to reevaluate the arbitrator’s assessment of the evidence and modified its determinations.
On appeal, the SCPR considered that the issue was not a mere miscalculation, nor was there fraud, improper conduct, or lack of jurisdiction involved. Neither did the arbitrator resolve a matter that was not submitted to it nor was it the imperfect award in matters of form. Thus, Article 23 of the PRAA was inapplicable.
The SCPR determined that by reviewing the merits of the award, the lower court had erred because the agreement to arbitrate did not require the award to conform to law. The court went on to discuss the exception and reiterated the general principle that the determinations of an arbitrator were final and not reviewable by the courts, even if there was an error in the assessment of the facts and the law. The court again relied on Autoridad Sobre Hogares, Samaritano & Co., and Porto Rico Steamship as well as other labor cases. The court noted that:
In the absence of fraud, holding the hearing, violation of public policy, lack of jurisdiction, or failing to resolve all issues subject to controversy . . . we lack the authority to annul an arbitration award “for mere errors of judgment, be these as for the law or as for the facts.”
Despite the case originating from a transaction involving a multi-year construction project, there is no reference to the FAA in the opinion. At the time, the U.S. Supreme Court had resolved Southland v. Keating, where it held that state courts had to apply the central provisions of the FAA, and decided Moses H. Cone Memorial Hospital v. Mercury Construction Corp. involving a construction contract.
The SCPR’s 1994 U.C.P.R. v. Triangle Engineering decision involved a construction dispute between the owner of a project, the general contractor, and a subcontractor. The dispute likely involved interstate commerce, if not for other reasons, because a New York-based surety company was involved, and the construction included the installation of an air conditioning system imported from the U.S. The lower court intervened when some of the parties refused to arbitrate the dispute.
The court eventually adjudicated the controversy and entered judgment arguing that arbitration was unnecessary because there were no controversies of fact, and the court could adjudicate the applicable law. The SCPR revoked and ordered arbitration. In its decision, the SCPR cites several local and federal labor cases from federal courts but makes no mention of the FAA , Southland v. Keating, or Moses H. Cone.
In its 2002 decision in Crufon v. Autoridad, the court evaluated the issue of arbitrability. A construction company had filed an action to compel the government to arbitrate whether there was a duty to modify the terms of certain construction contracts due to an increase in the federal minimum wage. The lower courts determined that the dispute was arbitrable. The SCPR reversed holding that there was an issue of “arbitrability” that required the courts to examine the parties’ intention to determine which controversies they had agreed to submit to arbitration. The court held that the controversy was not arbitrable because the parties had not agreed to submit it to arbitration.
This was a transaction affecting interstate commerce, but the Court did not consider the FAA or its precedents, such as Southland v. Keating. Instead the SCPR focused on the PRAA and the Civil Code. It held that the task of determining ‘arbitrability’ belonged to the judiciary.
Municipio de Mayagüez v. Lebrón is a 2006 case involving a dispute between a municipality and a construction firm. The agreement stated that the construction services would be carried out following the plans and specifications submitted by the municipality. Those specifications provided for arbitration and following the rules of the American Arbitration Association (AAA). Lebrón demanded to arbitrate a dispute. The municipality requested continuance of arbitration proceedings and a hearing arguing that it was not bound by the arbitration clause because it was not specifically included in the agreement. The lower court dismissed the arbitration claim and the appeals court affirmed. The SCPR reversed stating that the arbitration clause had been incorporated into the construction contract by referencing the required specifications into the agreement. The SCPR acknowledges that the FAA covers contracts in the interstate commerce but does not specifically state that it applied to the contract in dispute. Instead, it applies the PRAA and its precedents. The Court affirms it as the principal law of arbitration but also surveys cases from various federal and state jurisdiction for guidance.
Citing Article 4 of the PRAA, the court resolved that the parties had a right to have a court and not an arbitrator decide regarding the duty to arbitrate. In reaching this decision, the court did not consider whether the rules of the AAA reserved these decisions to the arbitrator as it did later in Carso.
In VDE Corporation v. F & R Contractors, VDE and F & R signed a construction contract to develop a walk-up housing complex. It included an arbitration clause to resolve disputes. The parties initiated the arbitration process. Once it began VDE declared F & R in default and terminated the contract. After a hearing, the arbitrator issued a partial award on the default matter and left pending the rest. In a subsequent hearing, VDE argued that the arbitrator lacked jurisdiction to continue and that it considered that any action by the arbitrator or award issued after the date stipulated for to render the award had no legal effect. Because the arbitrator continued the process, VDE filed an injunction in court to enjoin the arbitrator for further serving as arbitrator. The court then issued a preliminary injunction ordering the arbitrator to cease and desist from continuing with the arbitration process in dispute until the petition for permanent injunction was resolved. F & R’s reconsideration and appeal were denied. F & R’s argument was that under the PRAA, the arbitrator had been stripped of its jurisdiction by exceeding his authority, issuing an award that was not final and by making mistakes that injured F & R’s rights.
The SCPR examined whether an injunction could be issued against the arbitrator; and if the partial award complied with the principle of finality for the purposes of judicial review. It held that while an injunction was part of the remedies available to a litigant including a party to an arbitration seeking judicial review, F & R had not shown it met the strict requirements for its issuance. As to partial awards, the court stated that the law did not contain any provision preventing an arbitrator from issuing partial awards. Therefore, if the parties agreed to the bifurcation of the adjudication of the controversies, that pact did not contravene the PRAA and was valid and enforceable under the principles of freedom of the contracting parties and the principle of pacta sunt servanda. The SCPR held that courts can review arbitration awards that are partial but at the same time final and definitive in as much as they resolve controversies that are independent and separate from the rest. The SCPR mentions the FAA and cases at the circuit and district level, interpreting that section 10(a)(4) permitted partial awards under such circumstances.
Constructora Estelar v. Autoridad is a 2011 case where the SCPR confirms, among other issues, the validity of an arbitration pact that required an award to ‘conform to law.’ The Court also reiterated the norm that the scope of the judicial review in such cases was to treat the awards as a review from an administrative agency. Under this standard, the courts could only intervene with the facts if they were unreasonable, arbitrary, or illegal.
A matter not to be ignored is that the decision of Constructora Estelar comes only four years after Hall Street, a notable decision by the U.S. Supreme Court that rejected expanded judicial review under the FAA. Hall Street was highly relevant because both laws, in terms of judicial review, are practically identical. They specifically enumerate the grounds and scope of judicial review in a finite list. None include the ability of the parties to disregard the specified circumstances and choose a different framework for vacatur. And in both cases the parties crafted their own judicial review criteria.
Once more, the SCPR conducts its analysis of the scope of judicial review solely on PRAA grounds. It does not consider the likelihood that the FAA had jurisdiction over the matter, nor is the case even mentioned in the opinion. The SCPR examines federal cases but does so from a distance, as merely persuasive decisions and not once is Hall Street acknowledged. Instead, the court turns to Autoridad Sobre Hogares, the labor case that predates the enactment of the PRAA.
By dodging the scrutiny of the FAA as applied in Hall Street, the SCPR avoided engaging in an analysis that would have made difficult to justify the exception of ‘conforming to law’.
In H.R. Inc. v Vissepó & Diez Construction Corp., the issue was whether a party had waived the right to arbitrate a claim that was subject to an arbitration agreement when it failed to raise the matter at the beginning of the case.Even though the case involved a construction contract worth over eight million dollars, the court not once mentions the FAA except to distance itself from an act that was applicable “in the federal sphere”:
[T]he policy in favor of arbitration is not unusual in other jurisdictions. In the federal sphere, the arbitration process is regulated by the Federal Arbitration Act, 9 U.S.C. § 1 et seq. It applies to interstate contracts and establishes that the arbitration clauses in the contracts are valid, irrevocable, and mandatory. When an arbitration process is agreed in a contract, the courts lack discretion to determine its effectiveness and must comply with the arbitration as agreed.
B. Cases Under the Dealers’ Act
McGregor-Doniger, Inc. v. Tribunal Superior is a 1970 case. It involved the termination of a manufacturer’s representative contract. The representative sued under the Dealers’ Act for damages. The Act protects distributors from principals that terminate or impair a distribution contract without cause. The defendant alleged as a defense that the agreement was subject to an arbitration clause and requested a stay of the proceedings. It appealed after the lower court refused to suspend the case. The SCPR revoked the decision and ordered the suspension of litigation until arbitration was conducted in accordance with the provisions of the contract. The court stated that:
Because the contract in question involves a transaction in interstate commerce, its arbitration provision [was] governed by federal arbitration law. Said federal law authorizes the suspension of proceedings for the purpose of arbitration pursuant to the agreement (9 U.S.C.A. Sec. 3); Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967). The arbitration law of Puerto Rico contains a provision almost identical to this (32 L.P.R.A. § 3203).
The favored status of arbitration soon suffered a setback when the SCPR carved out an exception in the 1975 case ofWalborg Corporation v Superior Court. In this case, a distributor sued the principal under the Dealers’ Act. The contract provided for an arbitration clause requiring disputes to be arbitrated under New York law and the AAA. The SCPR voided the arbitration provision based on public policy grounds, arguing that the public policy favoring arbitration was not stronger than the protectionist policies and rights unalienable under Act 75.
In World Films v. Paramount Pictures Corp, the plaintiff sued Paramount Pictures Corporation and another entity with offices in Los Angeles, California for injunctive relief, declaratory judgment, and damages under the Dealers’ Act 75. The statute declared null any provision in an agreement that required a distributor to arbitrate or litigate a claim under the Act outside of Puerto Rico.
The parties’ distribution agreement included an arbitration clause in accordance with the rules and procedure of the American Film Marketing Association. Overruling Walborg, the court held that the parties’ contract involved interstate commerce and that pursuant to the decision of Southland v. Keating the provisions of Art. 3-B of Act 75 conflicted with the FAA and thus were preempted.
The dissenting opinion of four judges in L.M. Quality Motors v. Motorambar, Inc., displays how conflicted has been the SCPR’s interpretation of the FAA. Decided a month after Constructora Estelar, the controversy pitched the provisions of the Dealers’ Act against an arbitration clause in a dispute involving the distribution of cars imported to Puerto Rico. The distributor argued that the principal had terminated the distribution contract without cause and petitioned for an injunction to enforce the agreement. The principal requested the dismissal of the case based on the distribution agreement between the parties that included an arbitration clause. It argued that the court had no jurisdiction to intervene in the dispute.
Despite the clause and the applicability of the FAA, the lower court disregarded the arbitration agreement and held an evidentiary hearing to determine whether the agreement had been freely and voluntarily subscribed by both parties.
Before any agreement or clause that would compel the parties to resolve through arbitration any controversy arising under a distribution contract granted pursuant to the present chapter may be invoked or made effective, it shall be an indispensable requirement before said controversy may be submitted to arbitration, at the request of any of the parties, that a court with jurisdiction in Puerto Rico determine that said clause or arbitration agreement was subscribed freely and voluntarily by both parties.
There shall exist controvertible presumption that any arbitration agreement or clause contained in a distribution contract was included or subscribed at the request of the principal or grantor, and that any agreement or clause that compels the parties to resolve through arbitration any controversy arising under said contract is an adhesion contract to be interpreted and made effective as such.
After the hearing, the court determined that the arbitration clause was invalid. On appeal the SCPR ordered the suspension of the proceedings and ordered the concessionaire to show cause why the lower court’s determination should not be reversed. The dissenting judges argued for invalidating the agreement. They reasoned that it was the court’s duty to determine whether an arbitration agreement required parties to arbitrate a dispute. The lower court had determined that the parties had not consented to arbitration because they were not adequately informed of what was involved by accepting it.
Citing Volt Inf. Sciences and World Films, the dissenting opinion in L.M. Quality Motors maintained that the FAA did not preempt when the parties had agreed that the law of the state would apply to the arbitration clause and thus allowed courts under certain circumstances to stay arbitration proceedings.
The dissenters left out of its analysis two important decisions from the U.S. Supreme Court, Mastrobuono v. Shearson Lehman Hutton and Preston v Ferrer, both qualifying the reach of Volt. In Mastrobuono, the Court incorporated only the selected state’s substantive law but not its arbitration procedures. On the impact of Mastrobuonoover Volt, Professors Carbonneau & Blair explain that in Mastrobuono:
The Court places a qualification upon the freedom of contract principle articulated in Volt. In effect, after Mastrobuono, party choice of state law will be fully respected only when the choice of law fosters the recourse to arbitration or when the parties have expressly recognized that the state law contains a restriction on the right to arbitrate and expressly agree that the restriction is applicable to their arbitration.
In L.M. Quality Motors the choice of law did not foster recourse to arbitration, neither did the parties recognized the limitations of 278b-3.
In Preston, the U. S. Supreme Court ruled that the FAA preempted a state law that referred certain state law claims to a state administrative agency before parties could arbitrate their disputes. The parties’ arbitration contract contained a choice of law clause. It stated that “the agreement shall be governed by the laws of the state of California.” Ferrer argued that this provision called for the application of California procedural law. The U.S. Supreme Court disagreed.
The dissenting opinion in L.M. Quality Motors summarized and interpreted the provisions of the arbitration clause as follows:
The contract in its clause 36-2, established that the arbitrator’s decisions will be in accordance with the contract or the laws of Puerto Rico, in the areas in which there may be a gap in the contract. Obviously, the parties wanted that in the event of any conflict regarding the contract be resolved in accordance with the provisions of our legal system.
The opinion does not cite the actual wording of the clause. Still, based on the summary provided, a naked reference to Puerto Rico law can be argued is limited to the substantive aspect since nothing is explicitly stated for the arbitration procedure. The dissenting opinion suggests that it is the other way around: that unless the FAA is explicitly invoked, it is waived.
Too often the SCPR hesitates to acknowledge that the FAA applies to all contracts involving interstate commerce regardless of the jurisdiction they originate from. Hence, the FAA will apply in Puerto Rico when the transactions subject to arbitration affect interstate commerce. Under such circumstances, the SCPR is required to follow its provisions and enforce arbitration contracts agreed by the parties like any other agreement.
Being a distribution agreement dealing with imported automobiles, the dispute between the parties affected commerce and hence was covered by the FAA. This meant that while the parties selected Puerto Rico as their substantive law of choice, the applicable arbitration procedure should have been the FAA. For that same reason, the court should have preempted 278b-3 as in World Films, cited by the dissenting opinion but not followed. Preemption would have been proper because 278b-3 did not place arbitration agreements in equal footing with other contracts. To the contrary, its provisions attempted to undercut the enforceability of arbitration agreements, it imposed prerequisites to enforcement of an arbitration agreement that were not applicable to contracts generally, and were obstacle to the accomplishment of the full purposes and objectives of the FAA.
A final note on L.M. Quality Motors. The initial intervention of the lower court was likely improper under the holding of Buckeye Check, whereby a challenge to the validity of a contract as a whole, and not specifically to the arbitration clause within it, must go to the arbitrator, not the court. Rather than scheduling a hearing to determine whether the injunction was enforceable, the court should have dismissed the case. Continued judicial intervention provided the opposing party a receptive audience to pitch additional arguments against arbitration. The fatal blow was questioning the validity of its clause which legitimized the court’s intervention and ultimately decimated the arbitration agreement.
C. Labor & Employment Cases
Other than commercial, labor arbitration in the context of collective bargaining is the other type of arbitration in Puerto Rico. Labor arbitration is only available to employers and labor unions representing a worker or group of workers.
Although labor cases by their specialized nature have other considerations beyond the scope of this article, they need to be part of the commercial arbitration discussion because as we have seen, published opinions on labor arbitration are routinely cited as precedent by the SCPR in commercial cases where the PRAA and the FAA are applicable, particularly in the subject of judicial review of awards.
While commercial arbitration is specifically regulated by the FAA and the PRAA, there is no such statutory scheme governing labor arbitration at the local or federal level. However both forms of arbitration share similarities. They are the product of the will of the parties —negotiated in a commercial contract or in a collective bargaining agreement (through union representatives). Hence they have a binding effect. Both are favored by federal and state policy. In labor arbitration, the public interest is to achieve industrial peace.
As with commercial arbitration, public policy promotes quick adjudication and finality of the claims. In labor arbitration this is made possible by making awards final and limiting options for judicial review in cases of “(1) fraud, (2) improper conduct, (3) lack of due process of law in holding the hearing, (4) violation of public policy, (5) lack of jurisdiction, and (6) that the award does not resolve all the issues that were submitted for adjudication.”
The exception to limited judicial review is when the arbitrator is instructed to have the award conform to law, in which case the courts may correct legal errors in accordance with the applicable substantive law. The scope of judicial review of the arbitration awards that must conform to law is deemed by the SCPR to be analogous to the judicial review of administrative decisions. The duty to issue an award according to law arises from the collective agreement itself or from the submission agreement submitted to the arbitrator. It is an exception to the norm.
J.R.T. v. N.Y. & P.R. Steamship Co., is a leading case in labor arbitration dating back to 1949. The controversy ensued when a union filed a civil action to enforce an arbitration award. The employer argued that the arbitrator had committed errors of law and lacked jurisdiction to enter the award. While the case was resolved on other grounds, the SCPR issued for the first time the general rule that an arbitration award could not be vacated by mere errors of judgment, whether they be in law or in fact. Reasons to set aside an award were limited to instances of fraud, improper conduct, lack of due process of law in holding the hearing, violation of public policy, lack of jurisdiction, and in instances where the award did not resolve all issues that were submitted for adjudication.
The SCPR also considered circumstances in which the collective-bargaining agreement or submission to arbitration required the arbitrator to decide the issues submitted in accordance with the law; in which case, the arbitrators had to follow the rules of law, and render the awards in accordance with the prevailing legal doctrines.
Historically, the SCPR has relied on P.R. Steamship Co to maintain the doctrine of awards “conforming to law” in labor, and commercial arbitration cases as an exemption to judicial deference.
In the SCPR’s 2001 decision in Medina v. Cruz Azul de Puerto Rico an employee sued for discrimination despite a collective bargaining agreement requiring arbitration. The arbitration provision stated that “[I]n cases of suspension or dismissal, the parties agree to skip the first two steps of the procedure and it is agreed that in those cases in which the union decides to question said suspension or dismissal, the Request for Arbitration must be filed in the Conciliation and Arbitration Bureau.” 
Medina was terminated as part of a reorganization. She subsequently sued the employer for pregnancy and sex discrimination despite a provision in the collective bargaining agreement that required the employee to arbitrate termination claims before the Department of Labor’s Bureau of Mediation and Arbitration. The employee argued that under the SCPR precedent and the Bureau’s standing ruling not to arbitrate discrimination cases, she could do without arbitration and filed her case in court.
This case would have normally been decided using labor arbitration precedents. However, the employer argued that under the FAA the courts were required to enforce the arbitration clause agreed in the contract. The court thought otherwise. It ruled that the petitioner had neither allege nor proven that the employment contract was covered by the FAA for being part of the interstate commerce. Thus, neither the FAA nor its caselaw applied.
In the process of brushing aside the FAA, the SCPR created its own test —one which Medina failed— that the party that invoked the FAA had to “allege or prove” that the controversy was part of interstate commerce. This is not to say that there need not be a pleading or finding on the record referencing interstate commerce. However, the SCPR enunciates a standard that is neither adequately explained nor developed; and does not support it with cases in point.
Had it not resisted delving into the FAA, the SCRP could have achieved similar results by following Wright v. Universal Maritime Service Corp a case that explains how the FAA and its caselaw applied to union arbitration. Wright held that an employee covered by a collective bargaining agreement was not required to arbitrate a statutory claim instead of pursuing that claim in court unless that agreement provided a “clear and unmistakable waiver” of the right to bring the claim to court. A quick review of the arbitration clause, confirms that it was a generic provision that did not even mention discrimination.
In its 2019 decision in Méndez v Carso, The Court of Appeals reversed a decision by a lower court that had dismissed a Law No. 80, as wrongful discharge, by a claim filed under a special abbreviated court proceeding known as Law No. 2, under Law 80 filed by several independent contractors against Carso Construction and the P.R. Telephone Company (d/b/a Claro). The dismissal was based on the arbitration clause of the contractors’ professional services agreement. The Court of Appeals reversed the decision reasoning that the lower court had to initially determine if the contractors were considered employees because under Law No. 80, employment agreements were not subject to arbitration. Following precedent under the PRAA and labor union arbitration cases, the SCPR reversed the Court of Appeals. It noted that the parties had agreed that matters regarding interpretation, validity, compliance, or termination of the contract, the arbitration clause and the jurisdiction of the arbitrator would be arbitrated under the rules of the AAA. Hence, it reasoned that the lower court had correctly decided not to intervene in the controversy regarding the scope and nature of the contracts because that determination had been reserved for the arbitrator.
As to whether the arbitration agreement applied to the wrongful discharge claim the court turned once again to mixing and matching PRAA precedent with union arbitration decisions. The court cited Vélez v. Servicios Legales de P.R., Inc. (sexual harassment claim), Medina v. Cruz Azul (pregnancy and sex discrimination) and Quiñones v. Asociación (age discrimination). In all these cases the employee was bound by an arbitration clause in a collective bargaining agreement and the court allowed the employee to pursue her case in court arguing that legislation in these cases excluded arbitration. The court reasoned that Act 80 did not have a provision excluding arbitration or a requirement providing courts with original jurisdiction as in Quiñones. Hence, there was no legal provision to recognize an exception to the arbitration mandate.
Carso involves a dispute between independent contractors claiming to be employees, a construction firm, and a telecommunications company. Yet, the SCPR does not even hint a possible application of the FAA or its caselaw despite the 2009 U.S. Supreme Court decision of New Prime, Inc. v. Oliveira, and the 2008 decision in Circuit City that arbitration agreements in both independent contractor and employment contracts of workers engaged in interstate commerce are generally enforced under the FAA. Furthermore, the SCPR continues to find support in prior cases that validated foreclosing arbitration when mandated specifically by law or court rules; reasoning that that would be contrary to the FAA under Southland v. Keating, and subsequent cases that have held that the FAA displaces local legislation that prohibits arbitration of a type of claim.
Furthermore, when pursuing statutory claims, the SCPR does not make a distinction between single employment arbitration contracts as in Carso Construction and those under labor union arbitration agreements such as in Vélez v. Servicios Legales, Medina v. Cruz Azul, and Quiñones v. Asociación. In the federal sphere, labor union arbitration follows the Labor Management Relations Act precedent while non-union agreements generally fall under the FAA. For union employees the leading case is Wright v Universal, holding that courts have primary jurisdiction depending on the interpretation of the scope of the arbitration clause.
D. Other Relevant Decisions
In Paine Webber v. Soc. Gananciales, a brokerage firm filed a lawsuit to collect funds that had been wrongly deposited into the defendants’ account and which they had withdrawn and used. The defendants argued that the lawsuit should be dismissed because, according to the account contract between them, the disputes were subject to compulsory arbitration under the FAA.
Both parties engaged in extensive discovery which eventually led the brokerage firm to file a motion for summary judgment on the merits. Defendants in turn moved for dismissal, which the court denied. The Court of Appeals confirmed, holding that defendants had waived the right to arbitration by conducting extensive discovery. The SCPR acknowledged that the parties had agreed to submit to arbitration all disputes under the FAA. After briefly reviewing the FAA and citing McGregor-Doniger, the court revoked and resolved that the petitioners’ actions had not constituted a waiver of their right to arbitration. The court noted that the defendants had raised the arbitration defense from the onset when they answered the complaint and had requested the dismissal of the case.
In its 2010 decision in Méndez v. Nieves, the SCPR considered whether the arbitrators or the judges were called to decide the existence and validity of an arbitration clause incorporated by reference into a construction agreement. The court also discussed the adoption in our jurisdiction of the doctrine of separability, that asserts that arbitration clauses are severable, and that the invalidity of the underlying contract does not necessarily invalidate the parties’ arbitration agreement.
Méndez and Nieves were two businessmen that entered into a partnership agreement to engage in the purchase and resale of local and imported automobiles. After an ongoing dispute between them, Mendez filed an injunction and civil action in court to dissolve the agreement and obtain specific remedies. Nieves in turn moved the court to order Méndez to conduct arbitration. Méndez disputed the right to arbitrate arguing that despite the existence of an arbitration clause, the entire partnership agreement including the arbitration clause was null and void because it did not comply with certain provisions of the Puerto Rico Commercial Code. The lower court ordered the parties to arbitrate. The intermediate court affirmed but on other grounds. The SCPR also affirmed still on different grounds.
The court began its analysis by declaring that arbitration in Puerto Rico was governed principally by the PRAA, and then by the FAA when the contract in dispute was in the interstate commerce. FAA application meant for the court that it had to enforce the arbitration clauses according to their terms. Citing Southland, Mastrobuono, and Volt, the court concluded that when an arbitration clause stipulated that it would be subject to the law of a state, such law was to be applied even if the contract affected interstate commerce.
As in Medina v. Cruz Azul, the SCPR reasons that because the FAA only applies to contracts in the interstate commerce, its provisions are “activated only when the parties ‘allege and prove’ that the transaction involved in the controversy formed part of the interstate commerce” which, the court concluded, the petitioner had not done so in this case:
Although the federal arbitration law, occupies the field as regards interstate commerce, in the present case, the petitioner has never alleged and proven that the Company Agreement signed and agreed between it and the appealed party forms part of interstate commerce. For this reason, we are not, stricto sensu, bound by the guidelines of the Federal Supreme Court in interpreting the federal arbitration law, and the precedents that it has generated. In this sense, the non-applicability of the Federal Arbitration Law to the case at hand, does not connote that we must draw a heterogeneous route to that followed by the Federal Supreme Court, much less that we are prevented from seeing what has been resolved by the state courts that share our arbitration policy, at the time of solving the controversy here.
After declining the FAA’s jurisdiction, the court went to survey caselaw from Louisiana, Alaska, federal circuits, and even Spain. It settled for the principles enunciated in Buckeye, the U.S. Supreme Court decision that analyses section 2 of the FAA, and that the SCPR considered comparable to Article 1 of the PRAA. In adopting Buckeye, the court first embarked in a lengthy discussion bringing aboard the Civil Code and justifying why it was adopting what it considered persuasive legislation. It then ruled that an arbitration clause was severable from the remainder of the contract and unless the challenge was to the arbitration clause itself, the arbitrator could consider the issue of the contract’s validity.
In reaching its decision under the PRAA, the SCPR did not conduct a meaningful analysis of FAA’s jurisdiction and the issue of “involving commerce.” It succinctly declared that the FAA’s provisions were not activated because the interested party had not proven that the transaction involved in the controversy formed part of the interstate commerce. As in Medina v. Cruz Azul, the court did not fully develop this burden of proof test and cited no legal precedent in its support despite an obvious link between the dispute and interstate commerce.
As discussed earlier, the U.S. Supreme Court has held that section 2 of the FAA is to be read broadly, extending the FAA’s reach to the limits of Congress’ power under the Commerce Clause. Thus, the Act governs a wider range of transactions than those actually “in commerce” —that is, “within the flow of interstate commerce.” The Supreme Court has also adopted a “commerce in fact” interpretation for the phrase “evidencing a transaction,” under which section 2 requires only that a transaction in fact involves interstate commerce, even if the parties did not contemplate an interstate connection at the time that they entered into the transaction. Furthermore, “[a] party to an arbitration agreement seeking to avoid arbitration generally bears the burden of showing the agreement to be inapplicable or invalid.”
In Citizens Bank v. Alafabco, the U.S. Supreme Court reversed the Supreme Court of Alabama and held that there was enough nexus with interstate commerce to make the arbitration provisions enforceable pursuant to the FAA. The court found that even though the debt-restructuring arrangements had been executed in Alabama by Alabama residents, the debtor company had engaged in business in several states, using substantial loans from the bank that had been renegotiated and redocumented in the two arrangements; the restructuring was secured by debtor’s company’s business assets, including goods assembled from out-of-state parts and raw materials; and the lending practice that was represented in these deals had a broad impact on the national economy.
One of the essential purposes of the partnership between Méndez and Nieves was to import vehicles into Puerto Rico and according to the facts alleged in the complaint, Méndez had purchased several motor vehicles with his own money including the payment of shipping and import excise taxes on the vehicles that were subsequently sold to a third party.
Martínez Marrero v. González Droz is a 2011 opinion in response to a request for inter-jurisdictional certification. The SCPR was called to decide whether a binding arbitration agreed between a doctor and a patient prior to a surgical procedure was valid in Puerto Rico. Despite the arbitration agreement, the patient had filed a complaint in the U.S. District Court for the District of Puerto Rico by way of diversity against Dr. González who was a resident of California. The patient alleged that the physician had performed a breast augmentation and abdominoplasty surgery on her in a negligent manner. She sued for medical malpractice based on Article 1802 of the Civil Code of Puerto Rico. Despite the apparent involvement of interstate commerce, the Court again ignored the jurisdiction of the FAA. It made its analysis under the PRAA concluding that the arbitration agreement was void because it did not meet the Act’s requirements. It further held that the agreement was contrary to public order and policy favoring extra contractual claims to be litigated in courts.
Although a thorough analysis of this case is not the focus of this article, the matter of discarding the FAA is troublesome. By routinely setting aside the jurisdiction of the FAA the court has freely upheld legislation hostile to arbitration, or compel special rules of interpretation unfavorable to arbitration that would have been otherwiseinvalidated by the FAA under the Supremacy Clause. An exhausting article of this case posits that the decision is flawed, as a matter of federal and local law; and that the argument that the PRAA was inapplicable, seemed forced, without statutory support and contravening the FAA and recent cases invalidating state laws that prohibited arbitration of particular types of claims.
One of these cases is Marmet Health Care v. Brown. At issue was a West Virginia decision that held unenforceable a pre-dispute arbitration agreement applicable to personal injury and wrongful discharge claim against a nursing home. The U.S. Supreme Court considered the state court interpretation of the FAA both “incorrect and inconsistent with clear instruction in the precedents of this Court.” Citing AT&T Mobility, the Supreme Court held that the FAA clearly preempted the state’s public policy:
As this Court reaffirmed last Term, “[w]hen state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the FAA.” That rule resolves these cases. West Virginia’s prohibition against pre-dispute agreements to arbitrate personal injury or wrongful-death claims against nursing homes is a categorical rule prohibiting arbitration of a particular type of claim, and that rule is contrary to the terms and coverage of the FAA.
Later, in its 2017 decision in Kindred Nursing Ctrs. the U.S. Supreme Court reversed a decision by the Kentucky Supreme Court that invalidated a clause in an agreement entered with a nursing home, which required the family members of a resident to submit claims or controversies to binding arbitration. The state court had ruled that “a general grant of power (even if seemingly comprehensive) does not permit a legal representative to enter into an arbitration agreement for someone else; to form such a contract, the representative must possess specific authority to ‘waive his principal’s fundamental constitutional rights to access the courts [and] to trial by jury.’ ” The Court emphasized that the FAA “preempts any state rule that discriminates on its face against arbitration or that covertly accomplishes the same objective by disfavoring contracts that have the defining features of arbitration agreements.”
In no uncertain terms, the Court described the Kentucky Supreme Court actions as “specially imped[ing] the ability of attorneys-in-fact to enter into arbitration agreements”, pronouncing that the “court thus flouted the FAA’s command to place those agreements on an equal footing with all other contracts.”
As in Marmet Health Care and Kindred Nursing Ctrs., the SCPR developed and or upheld special rules and norms in Martinez Marrero to single out arbitration agreements for disfavored treatment. It held that the agreement breached the ‘public order’ because it deprived the patient of being able to seek a judicial remedy if she suffered damage due to medical negligence and was unenforceable because medical malpractice disputes had to be initially filed in the courts (judges then decided whether to refer the claim to arbitration).
IV. INTERACTION OF THE FAA AND PRAA IN PUERTO RICO: A FEDERAL COURT PERSPECTIVE
We can observe a different perspective of how the FAA could interact with the PRAA in Puerto Rico by examining the decisions of the United States Court of Appeals for the First Circuit which is the federal appellate court for the district court of Puerto Rico. In Ortiz-Espinosa v. BBVA Sec. of P.R., the court affirmed a judgment of the district that had denied a petition to vacate an arbitration award after it decided that the agreement was subject to the FAA despite the party’s action to vacate under the PRAA. The case initiated as a claim for violations of both federal and Puerto Rico law in the Financial Industry Regulatory Authority (FINRA) arbitration forum. After their claim was denied, claimants filed a petition to vacate in the Puerto Rico Court of First Instance under the PRAA. Defendants removed the case to the federal district court in Puerto Rico asserting federal-question jurisdiction based on federal securities laws. The district court subsequently denied the petition to vacate holding that claimants had not shown any plausible grounds to vacate or modify the award under the FAA or the PRAA. On appeal, claimant contended that they had sued under the PRAA and had only alleged state causes of action. The Court of Appeals held that:
Although claimants brought their petition to vacate under 32 L.P.R.A. § 3222, the FAA applies to arbitration agreements “in any maritime transaction or a contract evidencing a transaction involving commerce”. The Supreme Court has suggested that the parties may agree to review of arbitration awards under state law, explaining that “[t]he FAA is not the only way into court for parties wanting review of arbitration awards: they may contemplate enforcement under state statutory or common law, for example, where judicial review of different scope is arguable”. But we read Hall Street as holding that where the FAA applies, it may be displaced by state law (if at all) only if the parties have so agreed explicitly. Here, claimants have made no showing that the parties “contemplate[d] enforcement under” the PRAA, rather than the FAA. Claimants have not pointed to any language in their arbitration agreement indicating that the parties intended that state law would govern vacatur of the arbitration award. Accordingly, we will apply the FAA.
Because it decided that the FAA applied, the court reviewed the award based on its narrow and exceedingly deferential standard. In doing so, it bypassed considering whether the PRAA offered different grounds for vacatur. This approach is based on the premise that when the FAA applies, its provisions are applicable “unless the parties have so agreed explicitly.” A reasoning not necessarily shared by the SCPR.
The 2019 case of Dialysis Access Center v. RMOS Lifeline comes on appeal from a district court refusal to vacate an arbitration award affecting Puerto Rico-based Dialysis Access Ctr., LLC (“DAC”) and RMS Lifeline, Inc. (“RMS”), a Delaware corporation. Their agreement included a choice of law provision that mandated application of Puerto Rico substantive law and a dispute resolution clause that required the parties to submit to binding arbitration under the rules of the American Health Lawyers Association if no agreed-upon solution could be reached. After the arbitrator decided for RMS, DAC sought to vacate the award in the federal district court in Puerto Rico. The court applied the FAA’s standards and confirmed the award. On appeal DAC argued among other things that the PRAA rather than the FAA should have governed the standard of review. It cited Constructora Estelar, in support of its argument that “the district court should have undertaken a review more akin to a judicial review for an administrative agency decision, which permits some greater scrutiny of the merits of the award.” The Court of Appeals disagreed. It considered that neither party disputed that their transaction involved interstate commerce and ruled that the FAA applied to “a contract evidencing a transaction involving [interstate] commerce.” The court held that in order to prevail DAC had to show that the parties had “explicitly agreed to have the PRAA displace the FAA” which it had not done.
As to the PRAA displacing the FAA, the court stated the following:
That said, parties are free to contract around the application of the FAA in favor of state arbitration law, such as the PRAA, which we’ve described as providing a “more searching” standard of review, see Indeed, the Hall Street Court explained that “[t]he FAA is not the only way into court for parties wanting review of arbitration awards: they may contemplate enforcement under state statutory or common law, for example, where judicial review of different scope is arguable”. “Parties are generally free to structure their arbitration agreements as they see fit,” and “[j]ust as they may limit by contract the issues which they will arbitrate, so too may they specify by contract the rules under which that arbitration will be conducted.”. However, in order to effectuate FAA displacement, our circuit has been clear that such can occur “only if the parties have so agreed explicitly.”.
The federal caselaw has been seemingly receptive to a different standard of review under the PRAA but in each instance the parties’ agreements have failed to clearly state their intent to opt out of the FAA.
Considering Puerto Rico’s unique economy and political relations with the United States, most business transactions would likely affect interstate commerce. This would make the FAA almost universally applicable to business transactions in Puerto Rico. The SCPR does not seem to recognize this fully.
The court agrees that the FAA applies to Puerto Rico. However, the rulings of Constructora Estelar and its predecessors do not seem to be inserted in the debate of whether parties can agree to a more comprehensive judicial review criteria than that provided by the FAA for an arbitration agreement. The SCPR has not searched for such circumstances in the cases reviewed. Instead it has resolved that the mere reference to local law is sufficient to remove the controversy from the FAA, which is not the standard. To deprive the FAA of jurisdiction, the parties must specifically agree to do so. In my view, this deviation responds to the fact that the SCPR does not recognize the extent and breadth of the FAA’s jurisdiction in interstate commerce. Hence, it hesitates to integrate its analysis with the caselaw that has emerged under the FAA and prefers to develop its own structure and parallel interpretation of the federal statute.
Regardless of whether one party is against or for expanded judicial review, both need to account for the divergence between local and federal courts as the differences will continue to play a role in the final disposition of an award.
NOTAS AL CALCE
 Private arbitration agreements are voluntary and can be distinguished from mandatory arbitration agreements that may be required by administrative agencies or the law. See, Colón Molinary v. A.A.A., 103 DPR 143, 146 (1974).
 Salvador Antonetti Zequeira, Arbitraje Comercial en Puerto Rico: ¿Solución o Problema?, 11 Rev.Acad. PR Juris. & Legis. (2013), https://www.academiajurisprudenciapr.org/arbitraje-comercial-en-puerto-rico-solucion-o-problema/.
 Law No. 376-1951, 32 LPRA §§ 3201-3229. The law excludes arbitration arising from collective bargaining agreements. Labor arbitration is governed by the cases of the Supreme Court of Puerto Rico through which its rules have been developed.
 Many legal scholars argue that the FAA was initially a procedural statute enacted to manage special issues with arbitration contracts in federal court and later evolved into substantive federal law. See, Thomas E. Carbonneau & Henry Allen Blair, Cases and Materials on Arbitration Law and Practice 210 (2019) (“This historical background demonstrates the enormous distance that separates the FAA’s original meaning and purpose at the time of enactment from its current version inthe decisional law. The courts have extended the reach of the FAA far beyond the adjudication of specialized commercial claims and have given the right to arbitratenot only a substantive character, but a constitutional stature as well”).
“ ‘[C]ommerce’, as herein defined, means commerce among the several states or with foreign nations, or in any Territory of the United States or in the District of Columbia, or between any such Territory and another, or between any such Territory and any State or foreign nation, or between the District of Columbia andany State or Territory or foreign nation, but nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class ofworkers engaged in foreign or interstate commerce.”
 Arbitration may result from Collective Bargaining Agreements, but these are generally covered by the National Labor Relations Act of 1947, 29 U.S.C. §§ 141-197, not the FAA (although it may serve as guidance). Coca-Cola Bottling Co. of N.Y. v. Soft Drink & Brewery Workers Union Local 812 Int’l Bhd. ofTeamsters, 242 F.3d 52, 54-55 (2d Cir. 2001). See United Paperworkers Int’l Union v. Misco, Inc., 484 U.S. 29, 41 (1987).
 Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001). These are transportation employees engaged in interstate commerce. See also, New Prime v. Oliveira, 139 S. Ct. 532 (2019) (the exemption from arbitration includes interstate transportation workers with independent contractor agreements). Hence, apart from this exception, arbitration agreements in all other employment contracts of workers engaged in interstate commerce may be generally enforced under the FAA.
 Volt Inf. Sciences v. Stanford Univ., 489 U.S. 468, 478 (1989). Or one could argue, arbitration contracts enjoy certain special protection over regular contracts beyond “equal footing”. See Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24-25 (1983) (“The Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.”).
 Direct TV v. Imburgia, 136 S. Ct. 463 (2015) (“The Federal Arbitration Act is a law of the United States, and Concepcion is an authoritative interpretation of that Act. Consequently, the judges of every State must follow it.”); Southland Corp. v. Keating, 465 U.S. 1, 14-15 (1984) (“We therefore view the ‘involvingcommerce’ requirement in § 2, not as an inexplicable limitation on the power of the federal courts, but as a necessary qualification on a statute intended to apply in state and federal courts.”); Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006); Christopher R. Drahozal, In Defense of Southland: Reexamining the Legislative history of the Federal Arbitration Act, 78 Notre Dame L. Rev. 101 (2002) (“Legislative history reveals that while the ‘primary purpose’ of the FAA was to make arbitration agreements enforceable in federal court, a secondary purpose was to make arbitration agreements enforceable in state courts.”). Seealso, Vaden v. Discover Bank, 556 U.S. 49 (2009)
 See dissenting opinion of justice Thomas with whom justice Scalia joins in Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265 (1995) ( “In my view, theFederal Arbitration Act (FAA) does not apply in state courts.”) and justice O’Connor (“I continue to believe that Congress never intended the Federal Arbitration Act to apply in state courts, and that this Court has strayed far afield in giving the Act so broad a compass.”); dissenting opinion by justice O’Connor in Perry v. Thomas, 482 U.S. 483 (1987) (“This Court held in Southland Corp. v. Keating, 465 U.S. 1 (1984), that the Act applies to state court as well as federal courtproceedings. Because I continue to believe that this holding was ‘unfaithful to congressional intent, unnecessary, and in light of the [Act’s] antecedents and theintervening contraction of federal power, inexplicable,’ I respectfully dissent.”).
 See Volt Inf., 489 U.S. 468 (1989) (“The question before us, therefore, is whether application of Cal. Civ. Proc. Code Ann. § 1281.2(c) to stay arbitration under this contract in interstate commerce, in accordance with the terms of the arbitration agreement itself, would undermine the goals and policies of the FAA.We conclude that it would not.”).
 World Films v. Paramount Pictures Corp., 125 DPR 352 (1990), quoting Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24(1983); Medina v. Cruz Azul de Puerto Rico, 155 DPR 735 (2001) (“The FAA was enacted under the Commerce Clause. As such, its provisions are activated when the parties allege and show that the transaction involved formed part of the interstate commerce.”) (translation by author).
 The Supremacy Clause of the U.S. Constitution provides that “the Laws of the United States . . . shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, anything in the Constitution or Laws of any State to the Contrary notwithstanding.” U.S. Const. art. VI, cl. 2; See also, Jay B. Sykes and Nicole Vanatko, Federal Preemption: A Legal Primer, Congressional Research Service, 1 (July 23, 2019) referring to the language of the clause as the “the foundation for the doctrine of federal preemption, according to which federal law supersedes conflicting state laws.”
 Gade v. Nat’l Solid Wastes Mgmt. Assn., 505 U.S. 88, 98 (1992) (“Preemption may be either expressed or implied, and ‘is compelled whether Congress’ command is explicitly stated in the statute’s language or implicitly contained in its structure and purpose.’ ”).
 Id. at page 24. Also, the Court has explained that these subcategories of implied preemption are not “rigidly distinct,” and that “field preemption may be understood as a species of conflict preemption” because “[a] state law that falls within a preempted field conflicts with Congress’ intent . . . to exclude state regulation.” English v. General Elec. Co., 496 U.S. 72, 79 (1990). See also, Maryland v. Louisiana, 451 U.S. 725 (1981); Hines v. Davidowitz, 312 U.S. 52, 67 (1941).
 See justice O’Connor’s dissent opinion in Southland Corp. v. Keating, 465 U.S. 1 (1984), finding that the legislative history of the FAA established “nothing more than a rule of procedure, a rule therefore applicable only in the federal courts” requiring “federal, not state laws to respect arbitration agreements.” For Professor Thomas E. Carbonneau “the FAA’s legislative history makes clear that it was not intended to be a source of new substantive legal rights.” He cites one of the FAA’s proponents explaining the purpose of the Act:
This bill simply provides for one thing, and that is to give an opportunity to enforce an agreement in commercial contracts and admiralty contracts an agreement to arbitrate, when voluntarily placed in the document by the parties to it. It does not involve any new principle of law except to provide a simple method by which the parties may be brought before the court in order to give enforcement to that which they have already agreed to . . . . It does nothing more than that. It creates no new legislation, grants no new rights, except a remedy to enforce an agreement [to arbitrate] in commercial contracts and in admiralty contracts.
See, Thomas E. Carbonneau & Henry Allen Blair, Arbitration Law and practice, 110–111 (8th ed. 2019), citing 65 Cong. Rec 1931 (1924) (statement of Rep Graham).
 Id. (“Although the legislative history is not without ambiguities, there are strong indications that Congress had in mind something more than making arbitration agreements enforceable only in the federal courts.”). The court did not consider that the FAA applied only to federal court disputes because among other things, most civil cases were litigated in state courts; and subscribing to such limited interpretation would frustrate Congressional intent to place arbitration agreements in the same footing as other contacts.
 Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 630-31 (2009) (“Neither provision [section 3 nor 4] purports to alter background principles of state contract law regarding the scope of agreements [including the question of who is bound by them].”).
 Nitro-Lift Technologies, LLC v. Howard, 568 U.S. 17 (2012) (Vacating decision by Oklahoma Supreme Court that by declaring noncompetition agreements in two employment contracts null and void, rather than leaving that determination to the arbitrator in the first instance, it ignored a basic tenet of the Act’ssubstantive arbitration law); AT&T Mobility LLC v. Concepción, 563 U.S. 333 (2011) (preempting California’s “unconscionable” test that was considered anobstacle to the accomplishment of the full purposes and objectives of the FAA); Volt Inf. Sciences v. Stanford Univ., 489 U.S. 468, 477 (1989) (“whetherapplication of Cal. Civ. Proc. Code Ann. § 1281.2(c) to stay arbitration under this contract in interstate commerce, in accordance with the terms of the arbitration agreement itself, would undermine the goals and policies of the FAA”); Preston v. Ferrer, 552 U.S. 346 (2008) (superseding state laws lodging primary jurisdiction in another forum, whether judicial or administrative); Perry v. Thomas, 482 U.S. 483 (1987) (finding that § 2 of the FAA preempted § 229 of the California Labor Code which rendered unenforceable private agreements to arbitrate certain wage collection claims); Southland, 465 U.S. at 1 (1984) (Section of a California statute violated the Supremacy Clause by directly conflicting with § 2 of the FAA).
 Southland Corp., 465 U.S. at 16 (1984) (“In creating a substantive rule applicable in state as well as federal courts, Congress intended to foreclose state legislative attempts to undercut the enforceability of arbitration agreements.”). See also, Kindred Nursing Ctrs. Ltd. P’ship v. Clark, 137 S. Ct. 1421 (2017); Marmet Health Care Center v. Brown, 565 U.S. 530 (2012) (preempting a West Virginia ruling that invalidated arbitration agreements in nursing home contracts in allegations of personal injury or wrongful death).
 Section 2 embodies the national policy favoring arbitration and places arbitration agreements on equal footing with all other contracts. See Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006).
 The FAA does not confer an independent jurisdictional basis. It provides access to a federal forum if there is an independent jurisdictional basis; meaning that there must be jurisdiction despite the arbitration agreement. Hence, before a federal court may enforce an award under the FAA, the petitioner must show that the court has either diversity or federal-question jurisdiction. See Vaden v. Discover Bank, 556 U.S. 49, 59 (2009); Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 25 (1983) (explaining that the FAA does not confer federal jurisdiction on its own). See also Ortiz -Espinosa v. BBVA Sec. of P.R., 852 F.3d 36, 43 (1st Cir. 2017). Thus, unless the issues in the contract involve federal law or diversity jurisdiction, a state court will likely be the court to interpret the FAA.
 In determining whether a federal court has jurisdiction over § 4 petition to compel, the court is permitted to “look through” the arbitration agreement to the underlying controversy to establish if it is based on federal law. See Vaden v. Discover Bank, 556 U.S. 49, 62 (2009).
 Méndez v. Nieves, 179 DPR 359, 369 (2010), quoting, D.M. Helfeld, supra note 3 at page 20 (“As Prof. Helfeld affirms, Law No. 376, supra, was drafted using the Federal Arbitration Act, supra, as a model. Much of its provisions, especially those that are key, constitute a translation of the F.A.A. [Federal Arbitration Act] into Spanish.”).
Two (2) or more parties may agree in writing to submit to arbitration, in conformity with the provisions of this chapter, any dispute which may be the object of an existing action between them at the time they agree to the arbitration; or they may include in a written agreement a provision for the settlement by arbitration of any dispute which may in future arise between them from such settlement or in connection therewith. Such an agreement shall be valid, requirable and irrevocable except for the grounds prescribed by law for the reversal of an agreement.
32 LPRA § 3201.
 Article 22(c) provides for “[w]hen the referees are in error in refusing to postpone the hearing” and “when they commit any other error impairing the rights of any of the parties. Grounds for vacation under § 10(3) of the FAA refer to “where the arbitrators were guilty of misconduct in refusing to postpone the hearing” and “any other misbehavior by which the rights of any party have been prejudiced.”
 See Autoridad Sobre Hogares de Puerto Rico, v. Tribunal Superior, 82 DPR 344 (1960). (The court considered Articles 22 and 23 of the PRAA to be equivalent to sections 10 and 11 of the FAA, stating that “Articles 22 and 23, the only ones that allow judicial intervention to revoke, and to modify or correct an award, are an almost literal replica of the sections 10 and 11 of federal law. Our Spanish version of the subsection did not use a literal translation of the word’s ‘misconduct’ and ‘misbehavior’, but evidently the Legislator did not alter the meaning of said subsection when adopting it. The legislation of origin expresses in terms of misconduct or improper conduct (‘misconduct’), which leads to the revocation of the award, that the arbitrators refuse to postpone the hearing with sufficient reason for it, or that they refuse to hear pertinent evidence and material to the controversy. That same situation is expressed by our version in terms of error: when ‘they acted wrongly by refusing.’”) (translation by author).
 See Salvador Antonetti Zequeira, supra note 4 (“On an island that imports 90% of what is consumed or used, it is easy to see this relationship, and difficult, as I said, to think of commercial activities that are not related to interstate commerce. The unoccupied field is limited.”) (translation by author).
 Harris v. Havenar, 169 Cal. App. 2d 531, 532, 337 P.2d 832, 832, 1959 Cal. App. Lexis 2103 (“In the absence of some limiting clause in the arbitration agreement, the merits of an arbitration award, either on questions of fact or of law, may not be reviewed except as provided in the statute.”); Amicizia Societa Navegazione v. Chilean Nitrate & Iodine Sales Corp., 274 F.2d 805, 807, 1960 U.S. App. Lexis 5360 (“The statutory provisions, 9 U.S.C. §§ 10, 11, in expressly stating certain grounds for either vacating an award or modifying or correcting it, do not authorize its setting aside on the grounds of erroneous finding of fact or of misinterpretation of law.”); Smith v. Hillerich & Bradsby Co., 253 S.W.2d 629, 630, 1952 Ky. Lexis 1122 (Analyzing a Kentucky statute pertaining a labor arbitration, the court stated that “KRS 417.040 provides that the award of an arbitrator shall be final settlement of a controversy between the parties. It also provides that courts of equity have power to set aside awards on equitable principles; but this section has not been interpreted to mean that an arbitrator’s award may be set aside for mere errors of law or of fact.” It further added that “[i]f the parties wanted exact justice administered according to the forms of law they should not have agreed to substitute a private forum for a court of law.”); Kesslen Bros., Inc. v. Board of Conciliation & Arbitration, 339 Mass. 301, 302-303, 158 N.E.2d 871, 873, 1959 Mass. Lexis 801 (A labor case before the Board of Conciliation and Arbitration, a quasi-judicial entity, the court affirmed the board, stating that “[w]hile it is error of law, and not merely error of fact, to make a finding which is not warranted by the evidence, this is not an error which will invalidate the decision of arbitrators.”); D. Juilliard & Co. v. Baitch & Castaldi, Inc., 2 Misc. 2d 753, 754, 152 N.Y.S.2d 394, 396, 1956 N.Y. Misc. Lexis 1989 (“Since awards may not be vacated even for fundamental errors of law or fact, they certainly should not be set aside for mere refusal to compel a party to produce records. It is misconduct, and not mistake of judgment, which permits the court to vacate an arbitration award, and, surely, that has not been shown here.”); Brighton Mills, Inc. v. Rayon Corp., 282 A.D. 669, 669, 122 N.Y.S.2d 113, 114, 1953 N.Y. App. Div. Lexis 4617 (“All of the complaints of substance relate to alleged errors of fact or law made by the arbitrators, which we may not review.”).
 Linda R. Hirshman, The Second Arbitration Trilogy: The Federalization of Arbitration Law, 71 Va. L. Rev. 1305, 1315 (1985). The author noted that “a substantial number of state courts held that they were bound to apply the FAA.”
 Id. at page 214 (The SCRP reasoned that the arbitrator had erred; not because he had reviewed the merits of the award, but because the agreement had not included such provision. Pertinent section of the agreement stated that “[t]he award rendered by the arbitrator or arbitrators shall be final, and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof.”).
 Id. at page 218 (translation by author). In its decision, the SCPR reviewed the grounds for revoking awards, including reasons based on violations of public policy and instances where the award fails to conform to law if required by the agreement. Neither of these reasons are included in the FAA as grounds for vacatur.
 While not at issue, the court reviewed the norm of awards “conforming to law” as an exception to judicial restraint. Relying on Rivera v. Samaritano & Co., Inc., 108 DPR 604 (1979), the SCPR noted that “when the parties agree that the matters submitted to arbitration be resolved in accordance with the law, the court can review the legal merits of the award. See U.C.P.R. v. Triangle Engineering, 136 DPR 133 (1994).
 The project included the award of three bids for the construction of public schools totaling over $10 million which came from government funds (a portion most likely from federal proceeds). Also, the contractor agreed not only to build the structures, but to supply all materials, equipment, machinery, and labor. Id., at page 197. Crufon Const. 156 DPR, note 1. Given that Puerto Rico imports most of its materials, it is fair to assume that these materials had to come from elsewhere.
 Crufon Const., 156 DPR at page 205 (The “arbitrability” of a controversy —that is, the determination whether an agreement binds the parties to submit a given controversy to arbitration— is a judicial task.), 2002 TSPR 16, P.R. Offic. Trans.
 Méndez Jiménez v. Carso Construcción de Puerto Rico LLC, 202 DPR 554 (2019). This is important because “[j]ust as a court may not decide a merits question that the parties have delegated to an arbitrator, a court may not decide an arbitrability question that the parties have delegated to an arbitrator.” Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524, 530 (2019).
 Under 9 § 10(a)(4) it is grounds for vacatur where arbitrators “exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.”
 Constructora Estelar, 183 DPR at page 6. The clause stated as follows: “[t]he arbitrators shall decide the disputes submitted to them pursuant to the Laws of Puerto Rico and the decision shall conform to Law.”
 Constructora Estelar, 183 DPR at page 26, citing U.I.L. de Ponce v. Dest. Serrallés, Inc. 116 DPR 348, 354-55 (1985) (“When reviewing an arbitration award, we have established that this is analogous to that of a review [of an] administrative [agency] and that the role of the primary forum is that of an appellate forum.”) (translation by author).
 The “administrative agency” scope of review was first applied in Serrallés, 116 DPR 348 (1985). The agreement included an arbitration clause. See Id. atpage 355 (“[T]he procedure to be followed before the judicial forum will be one similar to that used when the court, acting as an appellate forum, reviews the correction or incorrectness of the sentence issued by a lower court or the decision of an administrative body. Resolving otherwise —in other words, allowing the controversy to be relitigated in an ordinary civil process— would constitute ‘throwing overboard’ the work carried out by the arbitrator; that is to say, it would convert the referred work into an exercise in futility and the inherent nature of the labor arbitration procedure would be distorted.”) (translation by author).
 The case arose from a construction dispute involving the remodeling of six public housing projects under a HUD-sponsored renovation program. For this large project, an out of ‘state’ surety company issued performance bonds.
 The SCPR established that for a party to prevail in its argument that the defendant waived its right to arbitration, it is not enough to argue that the defendant did not claim that right among its affirmative defenses. The party must also prove that the defendant performed affirmative acts without previously claiming their right to arbitration. The determining factor at the time of making the decision is the type of participation of the litigant in the court process. If the litigant invokes the judicial process defensively, the right to arbitration is not understood to have been waived; however, if the litigant uses the judicial system in the affirmative, it follows that the right to arbitration has been waived. The burden of proof rests on the party claiming waiver. Id. at page 606, quotingMcGregor-Doniger v. Tribunal Superior, 98 DPR 864, 869 (1970).
 Id. The arbitration clause required the contract to be governed by New York law and any controversy or claim arising out of or related to such contract would be settled by arbitration in New York City in accordance with the Rules of the AAA.
 Id., at page 364. The Court overruled its decision in Walborg. Corp. v. Tribunal Superior, 104 DPR 184 (1975), holding that an arbitration clause could not be granted greater force than the public policy of protection of distributors under Act 75.
 L.M. Quality Motors, Inc., 183 DPR at page 267. See AT&T Mobility LLC v. Concepción, 563 U.S. 333 (2011). (FAA preempting state rule providing that consumer contracts of adhesion were unconscionable where party with superior bargaining power allegedly cheated many consumers out of individually small monetary sums).
 Medina v. Cruz Azul de Puerto Rico, 155 DPR 735 (2001) (“The FAA was enacted under the Commerce Clause. As such, its provisions are activated when the parties allege and show that the transaction involved formed part of the interstate commerce.”) (translation by author). World Films v. Paramount Pictures Corp., 125 DPR 352 (1990), quoting Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24 (1983).
 Preston, 552 U.S. at page 353. See also, Doctor’s Assocs. v. Casarotto, 517 U.S. 681 (1996) where the U.S. Supreme Court held that the FAA preempted a Montana law that required arbitration provisions in agreements be redacted in the first page of the document underlined and in capital letters. Like the Montana law, section 278b-3 of Act 75 sought to assure that the arbitration agreement was subscribed freely and voluntarily by both parties. In Casarotto, the Court held that the Montana requirement statute directly conflicted with § 2 of the FAA because the state statute conditioned the enforceability of arbitration agreements on compliance with a special requirement not otherwise applicable to contracts.
 Aquino v. A.E.E.L.A, 182 DPR 1 (2011). When discussing labor and employment arbitration it is important to distinguish between employment disputes that arise from individual employment contracts (between an employer and an employee) and labor disputes arising in the context of a collective bargaining agreement negotiated between a union and an employer. The FAA and the PRAA regulates the former. Legal precedent governs the latter.
 See Art. 29 of the PRAA, 32 L.P.R.A. § 3229, specifically excluding from coverage labor arbitration. Labor arbitration is predominantly a product of private contracts between unions and the employers. Aquino v. A.E.E.L.A., 182 DPR 1 (2011); Confederación de Organizadores de Puerto Rico v. Servidores Públicos Unidos de Puerto Rico, 181 DPR 299, 324 (2011).
 Pérez v. Autoridad de Fuentes Fluviales, 87 DPR 118 (1963) (“The arbitration of labor disputes under the terms of collective agreements is [a piece] integral to the collective bargaining process.”) (translation by author).
 C.O.P.R. v. S.P.U., 181 DPR 299 (2011), quoting C.F.S.E. v. Unión de Médicos de la C.F.S.E., 170 DPR 443, 448 (2007) (“In Puerto Rico there is a vigorous public policy in favor of worker-employer arbitration.”) (translation by author); Vélez v. Serv. Legales de P.R. Inc., 144 DPR 673, 682 (1998); J.R.T. v. P.R. Telephone Co., Inc., 107 DPR 76 (1976).
 Textile Workers Union of Am. v. Lincoln Mills of Ala., 353 U.S. 448 (1957) (“Plainly the agreement to arbitrate grievance disputes is the quid pro quo for an agreement not to strike. Viewed in this light, the [Labor Relations Act] does more than confer jurisdiction in the federal courts over labor organizations. It expresses a federal policy that federal courts should enforce these agreements on behalf of or against labor organizations and that industrial peace can be best obtained only in that way.”); Pérez, 87 DPR at page 126 (“Arbitration as a peaceful means of resolving disputes is an institution of remote origins.”) (translation by author); See also, C.O.P.R., 181 DPR at page 321.
 In such circumstances, the arbitrator cannot ignore the rules of substantive law in the field of labor law and must resolve disputes in accordance with the prevailing legal doctrines. U.G.T. v. Centro Médico del Turabo, Inc., 202 DPR 917 (2019) citing Rivera v. Samaritano & Co., Inc., 108 DPR 604 (1979).
 C.O.P.R. v. S.P.U., 181 DPR 299 (2011); HIETEL v. Celulares Telefónica, Inc., 169 DPR 1 (2006); UGT v. Corporación Para la Difusión Pública, 168 DPR 674 (2006); Colón Molinary v. A.A.A., 103 DPR 143 (1974); United Steelworkers v. Paula Shoe Co., Inc., 93 DPR 661, 667 (1966); J.R.T. v. Sindicato Obreros Unidos, 92 DPR 60 (1965); Pérez v. Autoridad de Fuentes Fluviales, 87 DPR 118 (1963); and many others.
Constructora Estelar v. Aut. Edif. Pub., 183 DPR 1 (2011); Aquino González v. A.E.E.L.A., 182 DPR 1 (2011); VDE Corporation v. F & R Contractors, 180 DPR 21 (2010); Rivera v. Samaritano & Co., 108 DPR 604 (1979); Autoridad sobre Hogares de Puerto Rico v. Tribunal, 82 DPR 344 (1961); Febus v. MARPE Construction, 135 DPR 206 (1994).
 Warren Bros. Co. v. Cardi Corp., 471 F.2d 1304, (1st Cir. 1973) (“Since no reference to interstate commerce is made in any of the papers before the court, we must assume that the federal Act is inapplicable.”).
 The court did not explain what it meant by “proving” the interstate commerce nor the requirements to do so. And what happens when the involvement in interstate commerce is obvious? Must the party still come forth with proof? In Maxum Foundations, Inc. v. Salus Corp., 779 F.2d 974 (4th Cir. 1985), a case predating Medina v. Cruz Azul some 15 years, the Court of Appeals for the Fourth Circuit held that the FAA did “not require proof by affidavit or other specific evidence of the nexus to interstate commerce. Where, as here, the party seeking arbitration alleges that the transaction is within the scope of the Act.” The Court dismissed the argument that “the party invoking the Act must put forth specific evidence documenting the interstate aspect of the transaction.” See alsoRota-McLarty v. Santander Consumer USA, Inc., 700 F.3d 690 (2012).
 Sec. 6(a) of the AAA’s Employment, Arbitration Rules, and Mediation Procedures state that “[t]he arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement.” Sec 6(b) provides that “[t]he arbitrator shall have the power to determine the existence or validity of a contract of which an arbitration clause forms part.”
 Vélez v. Servicios Legales de P.R., Inc., 144 DPR 673 (1998). Ruling that Law to Prohibit Sexual Harassment at Work, Law No. 17 of April 22, 1988, 29LPRA § 155 et seq., was “clear in establishing that the employee affected by an act of sexual harassment should not [be seen] forced to go to any administrativeforum before resort to the civil judicial forum, neither of the State, nor of the employer, nor that which could be established by virtue of an agreement.” (translation by author). Note that in this case, there was no administrative forum, but a private arbitration proceeding.
 Quiñones v. Asociación, 161 DPR 668 (2004). The court turned to Art. 4 of Law No. 100, of June 30, 1959, 29 LPRA § 149 et seq., which provides that, in cases of discrimination based on age, race, color, sex, religion, social or national origin, or condition, the Court of First Instance and the Court of District will have concurrent original jurisdiction, if the dispute arises under certain specific sections of the law. The Court determined that it was inappropriate to take awayfrom the courts a power that was expressly granted by the legislator.
 See Preston v. Ferrer, 552 U.S. 346 (2008); Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681 (1996); AT&T Mobility LLC v. Concepción, 563 U.S. 333 (2011); Marmet Health Care Ctr., Inc. v. Brown, 565 U.S. 530, 533 (2012).
 See Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001). The validation of arbitration agreements in employment contracts gained momentum after Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991). This case upheld a decision requiring an employee to arbitrate an age discrimination law claim rather than pursuing it in court. The arbitration clause was not technically part of the employment contract. Rather, it was a requirement for employment with Interstate that Gilmer register with the NY Stock Exchange which in turn required arbitration of any employment disputes between Gilmer and a member of the exchange, which Interstate was. Lower courts applied Gilmer’s analysis “to uphold arbitration agreements in individual employment contracts, even those that compel arbitration of statutory discrimination claims.” See, Jennifer A. Marler, Arbitrating Employment Discrimination Claims: The lower Courts Extend Gilmer v. Interstate/Johnson Lane Corp. to Include Individual Employment Contracts, 74 Wash. U. L. Q. 443, 464-65 (1996).
 Wright v. Universal, 525 U.S. 70 (1998). An employee covered by a collective bargaining agreement is not required to arbitrate a statutory claim unless that agreement includes a “clear and unmistakable waiver” of the right to bring statutory claims to court. See also Penn Plaza, LLC V. Pyeth, 556 U.S. 247 (2009).
 McGregor-Doniger v. Tribunal Superior, 98 DPR 864 (1970). See prior discussion of the case, holding that petitioner had not waived its right to arbitration; that the burden to establish such waiver is on intervener and all doubts were to be resolved in favor of arbitration.
 Compare other jurisdictions that examine the dispute and make a specific determination whether it affects interstate commerce. Garlock v. 3DS Properties, LLC, 303 Neb. 521, 531 (July 5, 2019) (“[W]hile more complex transactions may implicate interstate commerce, we hold that a simple contract for the sale of residential real estate is an inherently intrastate activity. On the facts of this case, the UAA governs the purchase agreement.”).
 The SCPR has attempted to define the imprecise doctrine of “public order” as a series of norms and ideals in society that do not always reach a statutory formulation and that, furthermore, they transcend the laws. Martínez Marrero v. González Droz, 180 DPR 579, 589 (2011).
 The Court reasoned that the “integrity of patients who go to a doctor to obtain a service that allows them to recover or improve their health is above the contractual freedom that permeates our legal system and favoritism by arbitration as a public policy.” (translation by author). This argument was based on the incorrect premise that by selecting arbitration, the patient was waving the right to recover damages which was not the case. See Id. at page 590.
 FINRA operates a securities-related dispute resolution forum. However, it does not offer an appeal process for vacatur. Challenges to the award are court-based following applicable federal and state arbitration laws. See https://www.finra.org/arbitration-mediation/decision-award.
 Ortiz-Espinosa, 852 F.3d at page 42. See Carbonneau & Blair, supra note 40 at page 258 (a “party choice of state law will be fully respected only when the choice of law fosters the recourse to arbitration or when the parties have expressly recognized that the state law contains a restriction on the right to arbitrate and expressly agree that the restriction is applicable to their arbitration.”).
 Méndez v. Nieves, 179 DPR 359, 370 (2010). The SCPR reasoned that when an arbitration agreement states that it will be subject to a state law, the local law may be applied as stipulated by the parties regardless of whether the agreement affects interstate commerce.
 Id. at page 7, quoting Ortiz-Espinosa, 852 F.3d at page 42 (citing Hall St. Assocs. v. Mattel, Inc., 552 U.S. 576, 590 (2008)); P.R. Tel. Co. v. U.S. Phone Mfg. Corp., 427 F.3d 21, 29 (1st Cir. 2005) (abrogated on other grounds by Hall Steet, 552 U.S. at pages 583-84.); Volt Info. Scis., Inc. v. Bd. of Tr., 489 U.S. 468, 479 (1989) (citing Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985)); Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 57-58, (1995).
 In California, New Hampshire, Massachusetts, and Texas where the issue of expanded review has been considered along with the FAA, the states’ highest courts have made extensive deliberations as to whether the FAA preempts. See Cable Connection, Inc. v. Direct TV, Inc., 44 Cal. 4th 1334, 190 P.3d 586 (2008); Finn v. Ballantine Partners, LLC, 143 A.3d 859 (N.H. 2016); Katz, Nannis & Solomon, P.C. v. Levine, 473 Mass. 784 (2016); Hoskins v. Hoskins, 497 S.W.3d 490 (Tex. 2016); Nafta Traders, Inc. v. Quinn, 339 S.W. 3d 84 (Tex. 2011).
 For example, excluding from the FAA arbitral disputes in interstate commerce also exposes arbitration agreements to unnecessary scrutiny from PRAA caselaw including public policy considerations and special laws or regulations. See Martínez Marrero v. González Droz, 180 DPR 579 (2011); Walborg Corp. v. Tribunal Superior, 104 DPR 184, 190 (1975); Velez v. Serv. Legales de P.R., Inc., 144 DPR 673 (1998); Quiñones v. Asociación, 161 DPR 668 (2004). See alsoMedina v. Cruz Azul de Puerto Rico, 155 DPR 735 (2001). Furthermore, the parties seeking to invoke the jurisdiction of the FAA should consider the SCPR’s requirement that the party invoking the FAA must allege and prove that the transaction in dispute affects interstate commerce. Méndez v. Nieves, 179 DPR 359 (2010); Medina v. Cruz Azul de Puerto Rico, 155 DPR 735 (2001). Also, affirmatively participating in the local courts such as conducting discovery or availing of other courts remedies could imply a waiver to the right to arbitrate. See H.R., Inc. v. Vissepó & Diez Construction Corp., 190 DPR 597 (2014). See alsoPaine Webber v. Service Concepts, Inc., 151 DPR 307 (2000). Conversely, when including a “conform to law” requirement in the agreement, it is relevant to consider whether a dispute could arise from interstate commerce (and be subject to possible preemption by the FAA) and whether federal jurisdiction could be invoked in a future dispute (where courts interpret the PRAA coverage more narrowly). Also relevant in the analysis is the language used to invoke the PRAA and opt-out of the FAA.