Arbitration is a procedure in which the parties agree to submit disputes to an arbitrator or an arbitration panel for decision. It, unlike mediation, results in an award like a judgment in court.
The parties may contract before a dispute arises to submit any disputes to arbitration, and this agreement will be enforced under the Federal Arbitration Act and the various state arbitration codes. If the parties have not made such an agreement, the dispute may be submitted to arbitration after it arises.
Arbitration is designed to be an efficient, expeditious procedure for having disputes decided by an arbitrator experienced and well-versed in the subject matter of the dispute. Discovery is limited in arbitration. Many lawyers in arbitration treat the process as if it were litigation. This is costly and time-consuming and frustrates the objectives of arbitration. Discovery is usually limited to a review of each opposing party’s files and documents concerning the dispute, and a few, VERY limited number of depositions, each usually limited in time. Expert witnesses often are required to submit a written report setting out what the expert was asked to do, what documents and other information the expert reviewed, the methodology employed by the expert in his or her analysis, conclusions reached and the basis for them, and the expert’s opinions. This often constitutes the expert’s direct testimony, and the party offering the expert presents him or her only for cross-examination by the opposing party and, perhaps, for limited rebuttal testimony.
The arbitrator will conduct a hearing and will receive testimony from each party’s witnesses under oath, will receive documentary exhibits (usually without regard to the usual rules of evidence, giving each exhibit the weight the arbitrator believes it deserves), and will hear closing arguments or, alternatively, consider post-hearing briefs by each party. This procedure is very similar to a trial, but less formal.
The arbitrator then has a limited time to consider the evidence and argument of counsel and make an award. The award may be a standard award which makes a monetary award on each element of the claim, an award setting out findings of fact and conclusions of law which form the basis of the award, or a reasoned award which is typically a narrative explanation of the facts, the arbitrator’s reasoning, his or her analysis of the facts and often the law, and the award resulting from that analysis.
For smaller claims, usually $1 million or less, a single arbitrator is appropriate. For larger, more complex disputes a three-member panel is often appointed. The parties have input in selecting the arbitrator when the arbitration is administered by an ADR organization. Sometimes the arbitrators are appointed by the parties and these party-appointed arbitrators may not be neutral.
Arbitration awards are generally impervious to judicial review and reversal, except that awards may be vacated by a court having jurisdiction only for specific grounds set out in the Federal Arbitration Act or the applicable state arbitration code. The grounds are very limited and generally include fraud, refusal to hear evidence, arbitrator’s exceeding his powers, and arbitrator bias. The law and the courts give great deference to the process the parties have selected for resolving their disputes and are loath to intervene to upset the outcome.
Most construction contracts include an arbitration clause whereby the parties agree to resolve any potential disputes that may arise by using the services of an arbitrator. Many forms of agreement require arbitration as per American Arbitration Association guidelines while some others require mediation.
An agreement to arbitrate may be made either in advance of a dispute (e.g., in the contract) or after the dispute has arisen. The State Arbitration Codes and the Federal Arbitration Act enforce arbitration provisions in contracts. Courts and public policy favor the resolution of commercial disputes through arbitration "to promote judicial economy and to settle disputes quickly and fairly." Thus, courts will generally enforce such contractual provisions.
Construction disputes are often extremely complex, and arbitration may prove an arduous process; there are efficiencies, however, in part because discovery rules do not apply, proceedings are informal, and it is not necessary to follow formal rules of evidence.
$6,000/day worldwide plus travel and lodging expenses at cost. $600/hour for preparation. Estimated arbitration fees are charged in advance and the cancellation fee is typically one day per scheduled week that is postponed or cancelled.