Commercial arbitration is intended to provide a forum to resolve business-to-business disputes effectively, less expensively, faster and with more certainty than civil trial.  Those benefits are more likely to be achieved by counsel agreeing to common sense practical methods in conducting the arbitration.

There are recurring complaints about commercial arbitration.  In many instances, the reason for the complaints stem from the fact that users, including parties and counsel, are employing the same formal procedures they are accustomed to in civil litigation. Sometimes arbitrators are complicit by failing to manage the process.  The degree of management is difficult to gauge.  The process belongs to the parties.  An arbitrator must be sensitive and diplomatic to encourage the parties to tailor the case to what is necessary to achieve a fair and efficient arbitration.

The use of commercial arbitration has increased significantly over the last 30 years.  Cases have become more complicated and the amounts in controversy have increased.  The growth of binding arbitration of commercial disputes was started and grew out of companies’ fears of runaway jury verdicts and increase of costs and delays companies were experiencing in litigation.  The increase in the popularity of arbitration resulted in increased adversarial tactics, more discovery and formal motion practice.  As a result, parties were giving up grounds for appeal and other benefits of civil litigation without benefitting from lower costs and faster resolution of disputes.

Once an arbitration has been instituted, parties should communicate about the proceeding and attempt to tailor a process that fits their case, reduces the time and expense of the proceeding and at the same time allows each party a fair opportunity to prepare and present its case in a full and fair hearing.  Flexibility is a core concept in arbitration and the parties have a significant amount of freedom to design the procedure.  Arbitration agreements may be amended by the mutual written agreement of the parties.[1]  Some items that may be considered include the following:

1. Selection of the tribunal. If the arbitration agreement requires the appointment of three arbitrators and the parties believe that three arbitrators are too expensive or otherwise unnecessary, the parties may mutually agree to select one arbitrator.
2. Selection of the date and location of the arbitration. Some arbitration clauses designate a location that requires counsel and the arbitrators to incur travel expenses that can be reduced by the parties agreeing to change the site of the hearing.  If the date of the evidentiary hearing is mandated in the arbitration agreement and the parties are unable to meet the date, the date may be changed to a later date that would allow proper preparation and an early resolution.
3. Agree to streamline discovery. The fees and expenses of discovery are the main contributor to the cost of civil litigation.  Discovery in arbitration should be much more limited than in litigation.  Formal discovery can be reduced or eliminated by agreeing to an informal exchange of information and documents rather than interrogatories, request for admissions and motions to produce documents.  Time and money can be saved by limiting the number and length of depositions or disregarding depositions altogether by the use of written statements of witnesses that will be used as direct testimony with the witness subject to cross examination at the hearing.  If electronic discovery is necessary, each side should balance the cost versus the potential benefit.
4. Pre-hearing Disputes. Agree to an informal process for resolving pre-hearing discovery and other disagreements.  Most disagreements can be resolved without the need to file motions and responses.  If an agreement cannot be reached on the issues, then the arbitrator and Parties can consider what additional work is required and appropriate so that arbitrator is able to make a prompt and fair ruling.
5. Form of Award. Generally, the form of the award is specified in the arbitration agreement, and if not, by an association rule.  If the arbitration agreement specifies a reasoned award with findings of fact and conclusions of law, the Parties are free to amend the agreement and elect to have a standard award or a reasoned award.  The that includes findings of fact and conclusions of law requires substantial more time.
6. Dispositive Motions. Filing dispositive motions is costly. Counsel should refrain from filing dispositive motions unless the issue is a pure question of law that, if granted, will materially shorten or simplify the proceeding.  Some administrative entities have rules allowing the filing of dispositive motions.  These rules generally require the moving party to show that the motion is likely to succeed and dispose of an issue in the case as a matter of law without an evidentiary hearing.  This normally requires the moving party to present, in writing, the reasons the motion should be allowing; thus requiring the other party to present arguments in response to the request for permission to file the motion.  Another alternative that saves time, includes allowing the moving party to file the motion, and if it is apparent that the motion presents an issue of fact, the arbitrator may deny it without requiring a response.  If a dispositive motion is allowed, the arbitrator should allow briefing and permit the parties some discovery to avoid a losing party seeking vacature of the award because of arbitrator’s misconduct in refusing to permit evidence pertinent and material to the controversy.
7. Proof of Attorneys’ fees. In cases where reasonable attorneys are an issue, the Parties should consider presenting evidence of reasonable attorneys’ fees by affidavit, invoices and written objections after the evidentiary hearing and before the award is entered pursuant to a schedule set after admission of other evidence during the hearing.

[1] [1] McGowan, 12 Ways to Achieve Efficiency and Speed in Arbitration, Corporate Counsel (April 12, 2013); Arrastia  and Underwood, Arbitration: You Control the Process v. Litigation: The Process Controls You (Dispute Resolution Journal (Nov. 2009/Jan. 2010)

No information in this article is intended to constitute legal advice. For specific legal advice, please contact an attorney.

If you have any questions or would like more information about arbitration and mediation, please contact Michael Wilk at 713.220.9124 or mwilk@hirschwest.com.