Mediation & Arbitration / 4 min read
The simple answer is, yes. Arbitration can be administered in several ways. Considerations for determining which type to use depends on a variety of factors including cost, flexibility, control, customization, and speed, among other things. The three primary methods are: administered (institutional), self-administered (ad-hoc), and assisted (hybrid).
Administered Arbitration
An administered approach requires active involvement of an administering entity such as the American Arbitration Association (AAA) or Judicial Arbitration and Mediation Services (JAMS), throughout the process. During an arbitration proceeding administered by AAA, the case administrator manages the overall conduct of the proceeding. The process proceeds in accordance with the AAA rules applicable to the dispute. The AAA has the power and authority to rule on arbitrator issues, such as disqualification and the like; and can be very active in the pre-hearing management of the case.
Self-Administered Arbitration
An "ad-hoc" method is self-administered. It is designed to proceed without the involvement of an administering entity. Instead, the parties select the arbitrator(s) and then the parties and the arbitrator administer the proceedings themselves. The arbitrator essentially manages the proceedings unless otherwise provided for in the arbitration agreement. The parties may agree to follow AAA rules and procedures or may decide to follow their own procedures depending on their agreement. The downside here is there is no third party available to rule on issues such as arbitrator disqualification nor is there a streamlined process for addressing party issues such as consolidation and joinder.
Assisted Arbitration
This hybrid arbitration method offers the most in terms of flexibility and customization. Construction contracts frequently have a multi-step arrangement where the parties agree to mediate before they arbitrate. Typically, the mediator and arbitrator are different individuals; however, that is not always the case. The idea being that the parties attempt to work out their differences before incurring the expense and uncertainty of litigation.
In addition to the "Med-Arb" arrangement, a popular hybrid method is the "minitrial." The minitrial can take on different forms depending on the situation and is fast becoming a cost-effective approach to resolving highly contested cases where the parties are too far apart for mediation to be effective. A minitrial can educate the parties on the strengths and weaknesses of their respective cases, and even provide insight into how the arbitration may turn out. Typically, the minitrial includes opening statements, actual witness examination, and the exchange of exhibits. Depending on the agreement of the parties, the arbitrator (or arbitrators if a panel is preferred), may be asked to issue an "advisory opinion." This process is an indicator of how the arbitrator(s) may decide on certain legal or factual issues. The minitrial can be advantageous when there are specific matters that need resolution before a settlement can be reached.
We at Andrews Myers have seen the efficacy of minitrials firsthand. Just recently our firm was involved in an AAA arbitral proceeding in which the parties and the arbitrators agreed to this form of minitrial which led to an advisory opinion/award — not binding but persuasive. The advisory opinion eventually led to settlement and saved both parties hundreds of thousands of dollars in legal fees.
The hybrid method of arbitration is only as limited as the parties' imaginations.
So which method is best for you? Well, it depends. Administered arbitration is more costly because of the fees involved; however, the structured process makes this the most consistent option. Arbitrations administered by AAA follow specific rules meant to ensure a fair, efficient, and collaborative resolution. Complex cases involving technical or other specific expertise or knowledge can benefit from both administered and assisted arbitration methods. AAA case managers are excellent and experienced professionals that are well-prepared to steer the parties to resolution.
Disputes involving particularly complex legal or factual issues can benefit from the ad-hoc method. However, it is most beneficial to parties experienced in the arbitration process. Those new to the process would be better off in an administered proceeding.
It is important to keep in mind that all arbitrations are a creature of contract. The considerations and ultimately the decision must occur at the time of contracting, not after the dispute arises. Determining whether a particular method is advantageous to a specific dispute once the dispute arises may be too late. For that reason, it is always important to understand the options before signing the contract. Once the arbitration agreement is part of the contract, the only way to modify how it proceeds is by a subsequent agreement. That may not be possible after-the-fact.
If you are trying to determine which method is best for you, consider the following: Is cost a factor in your decision? Do you need added flexibility that a structured process will not allow? Do you need (or want) to have some level of control over the process? Or are you interested in customizing the process for a specific purpose unique to your business?
By answering these questions, and consulting with an attorney experienced in arbitration, you will be in a better position to make the best decision.