As we represent many clients in arbitration proceedings conducted through third party Alternative Dispute Resolution (ADR) vendors (such as JAMS, The American Arbitration Association (AAA) and Endispute, we have become concerned and alarmed at the cost and delay that has become part of the arbitration administrative process. Since one of the great benefits of arbitration has always been considered to be the efficiency and economy of the process, the development of cumbersome rules, administrative costs and delays in concluding the process have made resort to ADR through some of these vendors less and less appealing. One such vendor is turning the tides.
The American Arbitration Association has just released updated commercial arbitration rules. These rules come into effect on October 1, 2013 and were drafted and adopted in response to pressures applied from corporate users and attorneys alike, for a better managed arbitration system. The changes are intended to tighten the process in order to avoid the high costs of litigation. As part of this effort, mediation has become a requirement for any arbitration case involving $75,000 or more, and arbitrators have been granted more control over discovery, dispositive motions, emergency relief, preliminary hearings, and sanctions.
Mediation has become an integral part of AAA arbitration. Even before the appointment of an arbitrator in a case, a member of the AAA administrative team may discuss the option of mediation with the parties involved. While any party may opt out of the mediation process, at some time during arbitration mediation must take place in any case involving a dispute over $75,000 or more. Mediation may occur parallel to the arbitration process and up until the formal arbitration hearing begins. Thus, going through mediation should not lengthen the arbitration process but rather help resolve issues and speed the process along.
Again, the new rules aim at shortening and organizing arbitration procedures. It is suggested that prior to the arbitration hearing, both the arbitrator and parties involved meet to discuss the details of the proceeding. Such details could include: where arbitration is to take place, document exchange processes, witness lists, discovery, etc. While this rule is not mandatory the arbitrator has the power to insist that such a meeting take place.
Furthermore, the new rules grant the arbitrator more power over the details listed above. During discovery for example, the arbitrator has the authority to determine the extent of the process by determining what the “appropriate scope of discovery should be”. This update is closely tied to the new rules governing sanctions. Arbitrators may now penalize a party, or dismiss counter claims due to uncooperative parties, or discovery abuses. This is intended to help the arbitrator manage the case and help the arbitration process run smoothly.
Finally, arbitrators are now allowed to dispose of motions due to legal inefficiency or award emergency relief when circumstances call for such measures. Discovery will be structured and controlled to the amount of time required and motions that lack merit can be summarily dismissed.
By adopting these new rules, AAA has taken significant steps forward in controlling and reducing arbitration costs as well as the time it takes to complete the arbitration process.
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