1. Who decides whether a dispute is subject to arbitration if one party contests the arbitration clause in court?
A party may contest in court the arbitration clause which mandates arbitration. Absent a set of rules leaving the decision up to the arbitrators, the court determines whether an agreement requires arbitration. This rule, however, is swallowed by the exception because almost all clauses adopt a set a rules that call for the arbitrators to make decision regarding arbitrability. See, for example, AAA Commercial Rule 7.
2. What is the typical length of time of a typical arbitration?
According to statistics furnished by major arbitration providers, the average length of time from commencement to issuance of a final award is 7.3 months. Contrast that with the median length of a case in U.S. District Court: 23.4 months.
3. Does arbitration increase the expense of a dispute?
The attorney’s fees and expenses in litigation represent by far the most significant cost of litigation, and 80% of those are incurred during pre-trial motion and discovery practice. As discussed in #6, below, the advantage of arbitration is that excessive discovery is frowned upon. The costs of the panel and the arbitral institution administering the dispute are more than offset by limited discovery and the speed of the hearing
4. Why can’t we just agree to the Federal Arbitration Act (“FAA”) for our rules?
The FAA, which governs most arbitrations, is a substantive statute that establishes arbitration as a viable means of dispute resolution. This means that it creates the framework for arbitration. It is not a procedural statute- i.e. it does not purport to be a set of rules. There are a myriad of considerations the FAA does not- nor was intended- to address. For example, the FAA does not address the process of disclosure by or of disqualification of an arbitrator or the mechanics of conducting a hearing.
5. How do I select an arbitrator?
The parties, themselves, or usually their counsel select the arbitrators whose qualities are tailored to the dispute at hand: expertise, temperament, experience, and so forth. When arbitration is administered by third party administrator such as the American Arbitration Association, parties have access to their rigorously vetted lists of arbitrators.
6. How do you handle is discovery controlled in arbitration?
Almost all arbitral rules give the arbitration panel broad discretion in allowing discovery. I often look to the ideas expressed in the College of Commercial Arbitrators Protocols for Expeditions, Cost-Effective Arbitration. While exhorting the attorneys that arbitration is not litigation, I attempt to get the attorneys to agree to discovery. If they can’t agree I establish my own scheduling. Recognizing that, traditionally, arbitration did not contemplate depositions I either set limits on the number/length of depositions or, on occasion, I have on occasion imposed a “substantial need” standard before they will be granted.
7. How can I know the thinking behind the arbitrators’ decision?
Most arbitration clauses call for a “standard” award which is a brief declaration of which party prevailed and the amount of damage. We very often ask the parties at the end of the hearing if they would prefer a “reasoned” award in which some detail on our thinking behind our decision. A reasoned award is not the same as a full blown court opinion.
8. What about a “runaway” award?
Of course, “runaway” is in the eye of the beholder, but it is possible to fashion an appellate-like procedure into the process to review the award. Frankly, I am not a fan of such a process because it undermines the finality and speed of the award, which is the hallmark of arbitration.
9. Do arbitrators “split the baby” when arriving at awards?
Studies repeatedly indicate that arbitrators do make decisions that indicate that they have been persuaded by one side over another and award damages accordingly. There is NO splitting the baby. Only in a tiny minority of cases were damages awarded in the mid-range.
10. How much review can court exercise over an award?
Section 10 of the FAA provides narrow grounds for judicially setting aside (“vacatur”) of awards. It encompasses conduct such as undisclosed conflicts by the arbitators, fraud, and ruling beyond the scope of the clause. State arbitration acts have similar provisions.