New Jersey state Sen. Nicholas Scutari/courtesy photo

A measure seeking to establish certain consumer protections in arbitration, including curtailing the threat of fee shifting and weeding out conflicts of interest, was signed into law by Gov. Phil Murphy on Wednesday.

The law is intended to prevent arbitration organizations from administering cases in which the organization has, or has had, a financial interest. It applies to any arbitration administrator who provides services for disputes that result in mandatory arbitration between a consumer and a company.

"It is overtly advantageous for companies involved in arbitration proceedings to have the ability to choose a private arbitrator," Sen. Nicholas Scutari, D-Union, who co-sponsored S-1490 with Sen. James Beach, D-Burlington/Camden, said in a release Wednesday. Scutari is an attorney and chairs the Senate Judiciary Committee.

"An arbitrator should not have a financial interest at stake while administrating a proceeding and this law provides needed transparency in situations pertaining to consumer protections," Scutari said.

The legislation states: "Under New Jersey's current law, there are rules governing arbitrators and arbitration generally, but there are no rules pertaining to the regulation of arbitration organizations."

The new law targets fee shifting, prohibiting an arbitrator from requiring a consumer to pay the fees and costs incurred by an opposing party if the consumer does not prevail in the arbitration.

In addition, any arbitration organization that is involved in more than 50 consumer arbitration cases per year would be required to collect and publish information regarding each consumer arbitration within the previous five years, according to the legislation.

The bill would also require an arbitration organization to waive the fees and costs of arbitration, exclusive of arbitrator fees, for an indigent consumer; and to provide written notice to any consumer of the right to obtain a fee waiver and to keep specified information concerning a consumer confidential.

Last Dec. 16, S-1490 was amended to clarify that "any position-holder in a non-profit organization who is not compensated for holding that position shall not be considered to have a financial interest in the organization."

The amended measure passed the Senate on Jan. 13 by a 28-12 vote. The Assembly approved the amended bill on concurrence on the same day by a vote of 71-3. The original Assembly bill, A-4972, sponsored by Assemblyman Paul Moriarty, D-Gloucester/Camden, passed that house last March.

"I think it's a fairness issue and it's important to protect consumers," Beach said inside the Senate chambers just before S-1490′s passage earlier this month. "Somebody needs to level the playing field since it is often the defendant company who chooses the arbitrator."