Arbitration is a streamlined procedure used for hundreds of years to resolve legal disputes promptly, cost-effectively and fairly. Arbitration is a private proceeding in which an impartial third party considers arguments and evidence of the parties and then renders a final decision. In nearly all cases the arbitration agreement provides that the arbitrator’s decision is final and binding, subject only to a very limited judicial review.

Arbitration, if properly managed by the arbitrator, generally takes less time and is less expensive than litigation. The parties can also select an arbitrator with specific subject matter knowledge and experience to facilitate understanding and knowledgeable resolution of the dispute.

Arbitration Process

Arbitration must be stipulated as the selected dispute procedure by contracting parties. The agreement can be within an existing contract or contracting parties can agree to arbitrate in a supplemental contract, signed once parties begin looking for a way to resolve a dispute.

Arbitration clauses will usually identify the rules to be used and sometimes define the arbitration administrative services provider that will administer the proceeding. The International Chamber of Commerce, Judicial Arbitration and Mediation Services and American Arbitration Association are a few of the service providers of both administrative and arbitrator services. If no arbitrator has been designated, the ASP will provide qualified candidates to the parties for selection.

Once the arbitrator (generally 1, sometimes 3 arbitrator panel on large disputes) has been selected, the arbitrator controls the proceedings. Parties can represent themselves, although most parties are represented by legal counsel.

Arbitration is initiated by filing a claim with an administrative services provider (“ASP”) who, for an administrative fee, will manage all communications between the arbitrator and the parties, arrange for selection of the arbitrator(s) and handle all documentation requirements, fees and services.

After presentation of documentary and testimonial evidence, the arbitrator will make a final determination in a formal written award.

Arbitration Service Providers

The services of ASPs may vary. Many ASPs also have their own rules and procedures to implement the statutory provisions of the Federal and state arbitration laws.

Some ASP panels of potential arbitrators emphasize a specific approach or emphasis to the arbitration process. Some panels are exclusively retired judges, experienced litigation attorneys and law professors. Other ASPs comment upon their arbitrator’s philosophy - the balance between only enforcing legal obligations and taking into account equitable and industry practices and standards in arriving at their decisions.

Scope of Arbitrator's Authority

The arbitration clause can establish limits on the arbitrator’s authority. Applicable arbitration law also sets some limits on arbitrator authority. In general, the arbitrator’s authority is broad and sufficient to resolve all disputes between the parties. Most rules permit an arbitrator’s award to bind a party that elected to not participate in arbitration hearing proceedings.

International Disputes

Arbitration of international disputes are highly favored by many over the uncertainties of foreign laws, practices, customs, integrity of foreign legal systems and foreign legal processes. Special arbitration rules and considerations apply to arbitration of international disputes. Enforceability of a final arbitration award under local foreign law should be evaluated prior to stipulating foreign arbitration as your method of dispute resolution.

Strategic Consideration

Effective implementation of arbitration requires careful consideration of a number of dispute specific factors and strategic issues:

1. Should mediation or other forms of facilitated negotiation be tried before relationships are damaged during the adversarial arbitration process.



2. Should expedited procedures be specified or selected to control costs and schedules.



3. Should the arbitrator have a legal and contracts background or subject matter knowledge relating to the dispute or both.



4. Match the style and emphasis of the arbitrator and the ASP with the dispute and the parties.



5. Does the arbitration clause cover all related disputes. If not, can the parties agree to resolve all disputes.



6. Does your contract call for binding or non-binding arbitration.



7. Do you prefer a private, confidential resolution under arbitration as opposed to a public litigation proceeding.



8. Do the parties wish to limit or define the document discovery and witness depositions permitted.



9. Do both parties wish to place limits on length of hearing in their arbitration clause or agreement.



10. Consider arbitrators that share an arbitration approach consistent with your goals (would you prefer an arbitrator that moves the proceeding along with all due speed or do you prefer a management style that limits proceeding costs).

Finally, there has been increasing criticism that ASPs and arbitrators have allowed the "legalization" of the arbitration process, allowing migration from the litigation processes such practices as extensive document discovery and depositions, hardball tactics and lack of cooperation, motions and discovery disputes for arbitrator decision and lengthy hearings that are not actively controlled by the arbitrator.

This latest trend has resulted in disputes that take too long to resolve, cost too much to resolve and frustrate parties who selected arbitration to obtain prompt, economic and fair final binding resolution of their disputes. One solution is for parties and their representatives to take a more active role in selecting the dispute resolution process, the administrative services provider, the arbitrator and proceeding procedures best suited for the nature of the dispute and the parties. CSG can provide guidance to your organization regarding selection of appropriate services.