advantages of administered arbitration when going it alone just won't do, The

Dispute Resolution Journal, Aug-Oct 2002 by George, Joyce J

Joyce George compares administered arbitration with ad hoc arbitration in the following piece. Her conclusion: parties are decidedly better off engaging the services of a reputable ADR services provider to help them manage the arbitration proceeding than winging it on their own. The road to successful arbitration can be hazardous for inexperienced parties without the appropriate case management support and guidance. George refers to the rules and procedures of the American Arbitration Association to illustrate the advantages of administered arbitration from start to finish.

Arbitration has been widely accepted as a viable alternative to litigation. Its hallmarks include efficiency, economy and privacy However, by its very nature arbitration requires some form of agreement and cooperation between the parties. For this reason, if the structure of arbitration has not been previously agreed upon, attempting to obtain agreement once the dispute has erupted could be daunting.

Arbitration may take several forms. First, it can be court ordered. In such a case the court usually has the resources of administration and rules to guide the parties. Should arbitration fail the matter then proceeds to litigation.

Second, arbitration can be ad hoc, whereby it is agreed to and supervised by the parties alone. After the parties have agreed to arbitrate their dispute, ad hoc arbitration then requires continuous teamwork and cooperation. Therein lies the difficulty. The parties may feel that their cooperation can be easily interpreted as a form of weakness. This often results in an inability to move the process forward. Because the parties are already faced with a disagreement, the dispute, other decisions concerning administrative matters, and procedures become more difficult to resolve.

Finally, to avoid litigation, parties entering into an agreement may provide that future disputes are to be resolved by arbitration. An arbitration clause usually names the organization providing the dispute resolution services, such as the American Arbitration Association. The AAA provides structure to the arbitration, including rules` and administrative services- to guide the parties. If the parties don't have an arbitration agreement, the parties can agree to submit it to arbitration after a dispute arises. An agreement to submit the matter to the AAA for arbitration offers the advantage of a formalized structure and the avoidance of costly delays.

Ad Hoc Arbitration

The parties may feel that they can save costs by using an ad hoc arbitrator. The first hurdle the parties must overcome is how they will go about selecting such a person. Where can resumes of neutrals be found? What list will be used? What qualifications should the neutral have? What fee is acceptable to the parties? Is there an acceptable neutral who will arbitrate for that fee? If there is difficulty in resolving these issues, the selection process may come to a standstill. Under the AAA's administered arbitration, which is governed by the AAA rules, there is a formalized procedure designed to fulfill the requirements of the parties and aid them in the selection process.3

Should the parties overcome the first hurdle, a second problem awaits them. The arbitration process is unmanaged. There is no one to monitor the case flow, i.e., send out notices, coordinate calendars between the arbitrator and the parties, track document filings, etc.

There are other administrative issues facing the parties. What is the nature of the dispute to be arbitrated? What is the scope of the arbitrators' jurisdiction? How are notices to be given and when is an answer to be made? What selection process is to be used to name the arbitrators? What if a party fails to select an arbitrator? Should a default procedure be provided? If so, what procedure and how is agreement to be obtained between the parties? How can an arbitrator be removed or disqualified? Where is the arbitration to be held? What is the applicable law? What, if any, rules are to apply to the arbitration? What discovery procedures will be permitted? Can the arbitrator award any provisional remedies? What type of award is required? Is there any method for modifying an award once made? Is the arbitration to be binding? How and when is the arbitrator to be paid? Who pays the costs of the hearing facility?

Unfortunately, in ad hoc arbitration, parties begin to explore these issues only after the dispute erupts. Routine procedural and administrative decisions, required to prepare the matter for hearing, can temporarily or permanently derail the arbitration process. Strategically and tactically the parties are adversaries and, as such, will find it difficult to give attention to the procedural details while at the same time advocating their position. Additionally, procedural matters, having no direct impact on the substance of the claim, can each become a new battleground. As for the ad hoc arbitrator, he may be unwilling to take on these additional responsibilities for which he is not compensated. And if he is willing, the parties may not wish to pay the ad hoc arbitrator's hourly rate for handling such matters. Further, the ad hoc arbitrator may not be able to provide effective administration or his authority may be limited.