Study Of Corporate Counsel Shows Arbitration Is Past Its “Tipping Point,” Usage Declining

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http://arbitrationnation.com/wp-content/uploads/2013/03/Seesaw-190x178.jpgA new article is out with more detail about how opinions among counsel for Fortune 1000 companies have changed over the last 15 years with respect to arbitration and mediation.  (I posted initial info here last spring.)

By comparing results of a 1997 survey of Fortune 1,000 corporate counsel with results of a 2011 survey of Fortune 1,000 corporate counsel, Professors Thomas Stipanowich and J. Ryan Lamare conclude that ”[b]inding arbitration … reached its tipping point: while some longstanding concerns about arbitration processes have lessened, fewer major companies are relying on arbitration to resolve many kinds of disputes … and are evenly divided regarding its future use.”

In particular, the number of companies using arbitration to resolve disputes in the following areas dropped over that 15 year period: commercial, employment, environmental, intellectual property, personal injury, real estate and construction.  In some areas, the drop was significant.  In 1997, for example, 85% of companies had arbitrated a commercial or contract dispute in the past three years.  In 2011, that figure dropped to 62%.  In 1997, 62% of companies had recently arbitrated an employment dispute, and in 2011 that figure was about 39%.

The authors note that “the statistics meaningfully signal very different trends in mediation and arbitration.  Mediation usage is expanding and arbitration usage contracting in most conflict settings.  Key exceptions to the downward trend for arbitration are consumer disputes and products liability cases, which probably reflect expanded use of binding arbitration agreements in standardized contracts for consumer goods and services.”

Even if the companies had not recently used arbitration, would they use it in the future?  In 1997, 71% of counsel thought their company was likely or very likely to use arbitration in the future.  By 2011, only about 50% of counsel saw arbitration of corporate disputes in their future.

Why are corporate counsel less enamored with arbitration?  Data from the 2011 survey suggests that “leading concerns included: the difficulty of appeal, the concern that arbitrators may not follow the law, the perception that arbitrators tend to compromise, lack of confidence in neutrals, and, increasingly, high costs.”