Commercial Arbitration: How Arbitrators Think
By Gregg Bertram
Pacific ADR Copyright 2016
Even though currently under attack from many quarters, arbitration remains at this writing a popular means of resolving commercial and other disputes. Unlike civil litigation in the court system, however, rarely is there a record of arbitration proceedings. Indeed, many arbitration agreements expressly require that it be a confidential process. Edna Sussman’s recent survey of commercial arbitration practices, The Arbitrator Survey – Practices, Preferences And Changes on The Horizon, The American Review Of International Arbitration, Columbia Law School 2015, Vol.26 No.4, lifts the veil upon heretofore opaque arbitrator practice.
The Survey asked a number of questions of arbitrators here and abroad in 2012 and early 2013. 401 individual arbitrators responded to the Survey of whom 79% were from the United States. So, it is reasonable to conclude that the survey responses reasonably reflect prevailing preferences of many, even most, domestic commercial arbitration practitioners. The Survey yields some very interesting information.
Panel v. Single Arbitrator.
A significant majority of arbitrators prefer to work as a panel. This preference may be at odds with arbitrations perceived attributes of efficiency and time saving versus a civil trial. Arbitration panels are much more expensive than arbitrations with a single arbitrator. It is also more difficult to coordinate the schedules of three arbitrators and the parties and their attorneys thus leading to delay and attendant expense.
Facts v. Law.
Arbitrators tend to be much more influenced by the facts than the law according to the Survey. This reality places a premium on the ability of a litigant to tell a compelling, coherent story, especially since the Survey further reveals that most arbitrators decide liability issues early in the course of arbitration and well in advance of the arbitration hearing.
Many arbitrators pay little, if any, attention to standards of admissible evidence according to the Survey. The reasons usually advanced for this practice are 1.) that binding arbitration gives parties just one shot at justice and no appeal; and 2.) arbitrators wish to avoid challenges to the award based upon lack of so called “fundamental fairness.” Parties desirous of an evidence rule based arbitration need to specify the same in their arbitration agreement.
Pre-Hearing Rulings and Deliberations.
Unsurprisingly, a majority of arbitrator respondents have never or seldom granted a pre hearing dispositive motion. Some ADR provider arbitration rules such as the AAA Commercial Arbitration Rule 33 arguably discourage the granting of such pre hearing motions. Here too parties intending unfettered pre hearing motion practice should so specify that preference in their arbitration agreement.
Preliminary Views Of The Case.
The Survey demonstrates that a majority of arbitrators have formed an unchanging view of the case prior to the hearing and, in some cases, at the time of initial party submissions. This suggests that it is rare for a party to effect a material difference of an arbitrator’s initial perception at the arbitration hearing itself.
The Arbitration Award.
According to the Survey, a large majority of arbitrators focus upon two considerations concerning the award: 1.) getting the award completed promptly; and 2.) trying to ensure that the award can successfully withstand challenges from a losing party. It is equally important to arbitrators per the Survey that the rationale for the award be clearly explained.
Ms. Sussman’s comprehensive survey of arbitrators provides instructive information to arbitration practitioners. To the extent pre dispute arbitration clauses survive in a current climate of legislative distrust, attorney drafters of arbitration clauses should think carefully about, among other things, the desired number of arbitrators and applicable evidentiary rules. Litigators should recognize that arbitrator opinion is usually formed very early in the case and attempts to influence that opinion must begin immediately when the case is referred to arbitration.