Taking Control of the Arbitration Process

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Most of the time, we are told that solving a problem is simple. Buy this amazing product and you’ll lose weight quickly and easily – and keep it off!  Vote for me and your taxes will go down (and government services will improve).

Of course if there were easy solutions to difficult problems, the problems would disappear. Everyone would solve them, The Easy Way. We’d all be slim and trim (and eat and drink as much as we like) with little or no effort.

Arbitration (or any other form of ADR) is not the solution to all – or even most – of the woes of using courts and their associated civil procedure rules to resolve commercial disputes. But arbitration can work well if it’s used in a thoughtful and thorough manner.

Choosing commercial arbitration is a good start, particularly in international transactions and long-term commercial relationships. Making that choice is not my topic today (nor do I think it’s always the right choice). Today is about how you implement that choice.

There are lots of specific things that can be done to make arbitration work better and specifically, to improve upon the experience in court proceedings. Here are three ways to make commercial arbitration work better by taking more control of the process:

First: Tailor the language of the arbitration clause. Avoid boilerplate. It’s worth spending some time up front to make sure the choice suits the specific agreement and the commercial relationship. Vagueness and uncertainty invite arguments over interpretation that can be used to delay a hearing on the merits and run up the costs.

So take the pen. Doing so does not mean that you will have to spend a lot of time negotiating the arbitration clause. When deals are being papered, most dispute resolution clauses are accepted with little revision.  Drafting it in the first place makes sense.

Second: Make deliberate choices when incorporating formal arbitration rules (or drafting your own). Some rules are better than others. Some use a sole arbitrator, while others default to a 3-person tribunal which is usually more expensive and invites scheduling delays. Not all arbitration rules enable parties to seek urgent remedies from a tribunal, which may mean going to court before arbitration. That can be costly and riskier, particularly if you have to apply to local courts overseas for an urgent remedy. Choosing some institutional rules may cost more because you pay the institution as well as the tribunal.

Sometimes there are good reasons to select 3-member tribunals, national courts for interim remedies and institutional arbitration (just a there are good reasons to select court for some disputes). The point is to be deliberate about what arbitration rules you select (and amend them yourself to suit the commercial relationship – it’s almost always allowed).

Third:  Select an arbitrator who actually understands commercial arbitration. An arbitrator, or chair of a 3-person tribunal, can help you manage litigation costs by keeping the dispute focused and generally dissuading behaviour that may drive costs up and delay a hearing on the merits.

Unlike court proceedings, there is no right to pre-hearing depositions and comprehensive document production in commercial arbitration. International arbitrations typically involve document production on a request basis, and little or no pre-hearing “discovery” testimony. If parties cannot agree, an arbitrator can order document production focused on what is really needed and can authorize only those depositions that are necessary – if any. That arbitrator will not compromise the parties’ right to have a reasonable opportunity to present their cases but can keep everyone focused on what actually matters to the particular dispute.

To this list of three things to do, I will add: avoid temptation. For example, some people try to slant the arbitration process by drafting one-sided or overly clever rules. That is usually short-sighted. It usually creates animosity and ultimately makes cases harder to settle.

There is no magic bullet or a sure-fire Easy Way to make commercial dispute resolution less expensive, decided promptly on the merits and still inherently fair. If there were, we’d all do it. Taking more control can yield a less expensive and quicker process, if you’re thorough and persistent… and maybe if you eat right and get some exercise.

Topics:  Arbitration, Arbitration Agreements, Commercial Arbitration

Published In: Alternative Dispute Resolution (ADR) Updates, General Business Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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