Creative Arbitration Design and the First Case Conference

• Author: Stephen Richard Morrison
• Pages: 179-226

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chapter seven

Creative Arbitration Design and the

First Case Conference

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A. INTRODUCTION

If asked, most corporate counsel will explain that they routinely

include arbitration provisions in many of their commercial agree-

ments because they have been told that arbitration is quicker and

cheaper than going to court. The next thing you may hear is that

arbitration, unlike the courtroom, is private. The parties to the

contract do not need to air their dirty laundry in a courtroom

open to the public and media and expose all of their proprietary

processes and documents to scrutiny by their customers and

competitors. Corporate counsel may also point out the benets of

being able to select a decision maker with specialized knowledge.

In the court system, by contrast, parties are stuck with whichever

judge is assigned to the case, regardless of their familiarity with

the nature of the dispute or the industry from which it arises.

It usually stops there, but the most knowledgeable advocates

of arbitration will also identify the most signicant advantage of

arbitration: the ability of the parties working in conjunction with

a skilled and experienced arbitrator to design a procedure most ap-

propriate to the nature of their dispute. The principal advantage of

arbitration is that unlike the system of court-based litigation that

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exists in most jurisdictions, arbitration is exible and allows the

parties to develop ecient and cost-eective practices and pro-

cedures that will provide for a just and fair determination of the

issues with a minimum of unnecessary procedure.

Yet, in practice, few domestic arbitrations fully embrace the

opportunity to custom design a time- and cost-ecient process

suitable to the dispute. Far too many arbitrations fall into the

trap of becoming ersatz litigation, with prehearing process and

procedures modelled on the local court’s rules of civil procedure

and an evidentiary hearing that is eectively a trial conducted in

a boardroom rather than a courtroom. As a result, while the pro-

cess may be private and while the parties may get to consensual-

ly choose a suitable decision maker, the resulting arbitration will

not necessarily achieve the goal of being quicker and less expen-

sive than the state-subsidized court system.

Despite its apparent advantages, many users of arbitration, in-

cluding in-house corporate counsel, are starting to turn away from

this process as the preferred method of dispute resolution, in do-

mestic cases in particular. When not properly managed, arbitration

can take just as long as litigation and can cost even more because

of the need to pay for the arbitrators, the facilities, and a verbatim

reporter, all of which are provided at little or no cost in the court

system. Fortunately, this situation can be remedied. The balance of

this chapter will be devoted to understanding the reasons for the

trend away from arbitration and providing pragmatic solutions.

B. THE SOURCE OF THE PROBLEM

For arbitration to achieve its potential advantages, a culture shift

is required among counsel, the parties they represent, and, per-

haps most importantly, the arbitrators appointed by them. Every

aspect of the arbitration process must be looked at from the per-

spective of ensuring that the procedure is scrupulously fair to all

parties, saves time and expense, and ensures that the case will be

dealt with in a way that is appropriate to its importance and com-

plexity and the parties’ resources.

Creative Arbitration Design and the First Case Conference

181

A core issue is the fundamental failure of practitioners to see

arbitration as a completely dierent sort of animal from litiga-

tion. Most counsel who conduct arbitrations are also litigators.

The court rules of practice bring with them the comfort of famili-

arity. Everyone knows what to do and what to do next. Counsel

may complain from time to time about the rules’ unwieldy na-

ture and the extent to which they cost their clients unnecessary

money, but counsel have never seriously contemplated an alterna-

tive. Many arbitrators are quite happy to go along with this, and

the arbitration then becomes litigation by another name, which

captures none of the benets available to the parties, can take just

as long as bringing the case to court, and will cost even more. In

fact, where the arbitration tribunal is made up of three members,

instead of a sole arbitrator, arbitration can actually take just as

long as and cost much more than going to court.

Too often, when compelled by contract or statute to arbitrate,

parties and counsel elect, with the concurrence of their arbitrator,

to conduct the arbitration exactly as if it were a trial, but a trial

conducted in a boardroom instead of a courtroom. One frequent-

ly sees consensual provisions in submission to arbitration agree-

ments that state the arbitration will be conducted in accordance

with the local court’s rules of civil procedure. The parties want

adavits of documents and full rights of discovery. Counsel, per-

haps, fear that they will open themselves to allegations of negli-

gence if they do not insist on these steps. And it is not uncommon

for the parties to advise that they want the standard rules of evi-

dence to apply to the testimony and introduction of documentary

evidence at the hearing itself.

In fairness to the lawyers involved, it is not just them. Run-

ning an arbitration just like a trial may also t better into the com-

fort zone of many arbitrators for all of the same reasons. Especially

if the arbitrator is a retired judge or senior litigation practitioner,

replicating the standard adversarial system in an arbitration room

will feel like the most time-tested and reliable method of resolving

disputes. It is a forum that they are familiar with, and they know

the rules and exactly how to conduct the proceedings.