Arbitrations are best described as fast-tracked civil cases tried to the bench with less discovery perhaps, no firm rules on admission of evidence, and an extremely limited right of appeal, if indeed any. A general framework is created by designating one of several arbitral bodies in the parties’ contract, in which the parties can further tailor the proceedings, including the procedure for making the all important choice of the sole arbitrator or the panel who will decide the outcome. Factors to consider in arriving at that decision are discussed elsewhere on this site.
The degree of discretion accorded arbitrators, both in fact finding authority as well as the application of relevant principles of law, is somewhat astonishing, especially to one who has far greater experience in our federal and state court system. As for avoiding the effects of an award, for example under 9 U.S.C. Sec. 10(a), our courts have set extremely high standards for finding arbitral misconduct. Such leeway is understandable, however, when one is aware of the central aims of this alternative: speed, efficiency, economy and confidentiality.
In my view the single largest factor causing delays and exponentially increasing expense of litigation in our courts is the wide-ranging, needle in the haystack discovery searches permitted, largely without serious court supervision. Whole categories of new “litigation support” consultants and services have been spawned. Discovery in international arbitration, in contrast, is severely limited, generally restricted to document exchanges. Even in domestic arbitration the trend has been to seriously reduce the scope and expense of discovery, with arbitrators taking a more active supervisory role. A recent and significant example in the Arbitration Updates section of this website is the American Arbitration Association’s (“AAA”) amendment to its Rule 22, effective this past October, essentially mandating that the arbitrators seek the most efficient and cost-effective approach to discovery issues.
Several domestic organizations offer administrative services and rules of procedure under which arbitrations are organized. While somewhat similar in approach, differences exist which should be explored in structuring an arbitration agreement. For example, while parties sometime call for application of the AAA Rules, but do not utilize its services (an option which I feel should not be undertaken lightly), the CPR expressly provides for such “non-administered” arbitration. The CPR also specifically requires all arbitrators to be independent and impartial (Rule 7.1), even those appointed by either party. It even offers a “screened” procedure for selecting party-appointed arbitrators, who would not even know which party appointed them (Rule 5.4). In fairness, although the position of other arbitration organizations on the independence of party chosen arbitrators is more ambiguous, most are rapidly trending to this position of strict arbitrator neutrality as well.
The same care should be given to the choice of an international forum, whether it be the AAA’s International Centre for Dispute Resolution (“ICDR”), the International Court of Arbitration operating under the rules of the International Chamber of Commerce, or another. On the other hand, perhaps it would be appropriate to close with the reminder that whatever the forum or rules, the process continues to be only as good as the quality of the arbitrators chosen to conduct it.