Arbitration

Frequently Asked Questions about Arbitration

What is arbitration?

Isn’t arbitration the same thing as mediation?

If arbitration is an adversarial contest similar to a trial, why arbitrate instead of litigate?

Hasn’t arbitration become more like litigation – costly and slow?

What kinds of disputes can be arbitrated?

How long does it take to arbitrate a dispute?

Where does the arbitration take place?

How much does arbitration cost?

How do I initiate an arbitration?

How do I select an arbitrator?

What is arbitration?
Arbitration is a process in which the parties voluntarily consent to submit their dispute to an impartial third party or panel of third parties chosen by them, instead of going to court. Arbitration is intended to be faster and less expensive than court litigation, with the decision of the arbitrator or arbitrators being a final and binding resolution of the dispute.

Isn’t arbitration the same thing as mediation?
No. Arbitration, like litigation, is an adversarial contest in which the parties testify and introduce evidence similar to a trial, and in which the arbitrators, like judges, are empowered to decide the dispute and render a final and enforceable decision. Mediation, on the other hand, is a collaborative process in which the parties are empowered to negotiate and agree upon their own solutions to their own problems with the help of the third party mediator, who facilitates the negotiations, but has no power to decide the dispute or impose a decision on the parties.

If arbitration is an adversarial contest similar to a trial, why arbitrate instead of litigate?
The three traditional reasons to choose arbitration over litigation are speed, reduced cost and finality. These benefits are obtained, in part, by reducing costly and time consuming pre-hearing discovery and motion practice; by not literally following the state or federal rules of civil procedure or evidence; and by the severe limitations on the grounds for appeal imposed by state and federal arbitration statutes. In addition to the benefits of speed, reduced cost and finality, there are many other reasons why arbitration may be preferable to litigation, such as the ability to select the decision makers, rather than submitting the dispute to randomly assigned judges and to make the process less formal, more private and confidential. For a more in depth discussion of the differences between private arbitration and court litigation, look at Sherman’s article on Mediation and Arbitration: Alternatives to Litigation and Ways to Manage Conflict, particularly pages 15 through 25. To read the article, click here or go to the “Articles” page of this website and click on the article.

Hasn’t arbitration become more like litigation – costly and slow?
Yes and no. Historically, arbitration began as an industry dispute resolution mechanism in which the arbitrators were generally industry representatives, not lawyers, and disputes were resolved by the application of the customs and usages of the particular industry and the reasonable expectations of the parties, not the literal application of law. Today, arbitration has virtually become a substitute for litigation, and, particularly in commercial disputes, most parties are represented by lawyers and most arbitrators are lawyers. There is no doubt that lawyers have brought into the arbitration process the litigation practices that tend to make arbitration more like litigation, and therefore more expensive and subject to greater delay. This is neither necessary nor inevitable.

Arbitration is based upon the voluntary consent of the parties. As a result, subject to certain statutory limitations, parties agreeing to arbitrate can define the procedural rules governing the process to insure a speedier, less expensive and final resolution, if that is what they desire. On the other hand, if they are less concerned with speed or cost and are choosing arbitration primarily for some of its other benefits (privacy, confidentiality, control over selection of the decision makers, avoidance of published opinions and precedents or finality), they can define the process to achieve those aims. It is this ability to customize the process to meet the particular objectives of the parties on a case by case basis that, more than anything else, distinguishes arbitration from litigation

What kinds of disputes can be arbitrated?
Virtually any kind of dispute that is subject to resolution by a court can be arbitrated, provided all of the parties to the dispute knowingly and voluntarily agree to submit the dispute to arbitration.

How long does it take to arbitrate a dispute?
The time required from submission of a dispute to arbitration to final determination is a function of the nature and size of the dispute and the wishes and agreements of the parties and their attorneys. It can be as little as 30 days or as much as several years. The goal of arbitration is to provide a process that is much quicker than going to court, and absent an agreement to the contrary among the parties, the arbitrator will try to manage the process to insure a speedy resolution. The parties, however, have the power to control that part of the process in their contractual agreements to arbitrate, by providing for reduced discovery, limited motion practice, and even a specific time limit for completion of the process. The arbitrator has experience in the ways to shorten the process while still insuring a full and fair hearing, and the parties and their attorneys should take advantage of that expertise by conferring with the arbitrator early in the process.

Where does the arbitration take place?
The arbitration process is more formal than a mediation, but generally far less formal than a court proceeding. The arbitration can be conducted anywhere that is convenient for the parties and the arbitrator. Often the arbitration takes place in a conference room at the office of the arbitrator, which the parties perceive as neutral territory, but sometimes at the offices of one of the parties or their attorneys. In some large arbitrations, particularly when there are out of town parties, attorneys, witnesses and/or arbitrators, the parties will arrange for hearing and breakout rooms in a hotel for the convenience of all of the participants.

How much does arbitration cost?
Like the time required for arbitration, the cost is a function of many factors, such as the nature and size of the dispute, the actions and agreements of the parties and their attorneys regarding things like discovery, motion practice, length of hearing and form of final written award. The arbitrator will charge for both the time spent in the actual arbitration hearings, and study time in connection with things like discovery disputes, determination of motions, studying pre-hearing statements and legal briefs, and post-hearing study of hearing notes and transcripts, documentary evidence and drafting the final decision, called an award. Sherman charges $3,000 per day for the actual arbitration hearings, and $375.00 per hour for study time. Although arbitrators differ as to time spent on administering the case, as distinguished from time substantively devoted to the dispute, Sherman does not charge for the administration of the case. If your case is being administered by an arbitral association or provider like the American Arbitration association, they will have filing and administrative fees and you should review those fees with them. In most cases the arbitrator, like a judge, has the authority to assign or allocate some of the fees and costs of the process against a party or parties as a part of the final award.

How do I initiate an arbitration?
Many contracts already have an agreement to arbitrate (the “arbitration clause”) which includes requirements for initiating an arbitration, and you should follow those requirements. Often, they will include the designation of an arbitral provider, like the American Arbitration Association, and, if so, you should obtain a copy of their rules and also read and follow those rules. In the absence of a specific arbitration clause or designated arbitral association, contact Sherman at 602-264-3330 or fill out the contact information on the “Contact Sherman” page of this website. Sherman or his assistant will contact you promptly to discuss the arbitration, available dates, location, information for a conflict of interest check and contact information for all of the attorneys or unrepresented parties and other relevant information to initiate the process.

How do I select an arbitrator?
Many contract already have an agreement to arbitrate (the “arbitration clause”) which includes the method for selecting the arbitrator, and you should follow that method. Often, the arbitration clause will designate an arbitral provider, like the American Arbitration Association, and, if so, you should obtain a copy of their rules and also read and follow those rules regarding selection of the arbitrator. In the absence of a selection method in the arbitration clause or a designated arbitral association, contact Sherman at 602-264-3330 or send him a message. Sherman or his assistant will contact you promptly to discuss the arbitration and the process for selecting the arbitrator.

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