The set you select can affect costs and possibly the results

Part One of Four

Rules of procedure—the rules that govern the process for resolving a dispute—matter. They can materially impact the ability of a party to litigate its case in the way it would like, the cost of the litigation, and ultimately the result. The Federal Rules of Civil Procedure, for instance, are created by the U.S. Supreme Court following sometimes years of drafting work by judges, practitioners and academics, followed by public comment and revision. And then they must be approved by Congress.

Procedural rules are every bit as important in a private arbitration. But in arbitration, the parties decide the rules—sometimes without even realizing that they’re doing it, or at least without giving it careful consideration. A common example is an arbitration clause in a contract that provides for arbitration conducted by the American Arbitration Association (AAA). In agreeing to AAA arbitration, the parties thereby adopt the AAA rules—because that’s what the AAA rules say. But because arbitration is a creature of contract, the parties are actually free to adopt any rules they want, or even to write their own—regardless of whom they use as arbitrator or administrator of the arbitration.

Some arbitration clauses do not specify an agency to administer the arbitration but nonetheless adopt an agency’s procedural rules to govern the proceeding. Both the AAA and JAMS, Inc. have comprehensive and detailed sets of procedural rules to govern various kinds of disputes in arbitration: for instance, the AAA rules for commercial, construction, employment, labor, and international disputes, to name some, with separate sets of commercial rules for large, complex disputes (defined as cases where any claim exceeds $500,000) as well as expedited procedures. JAMS has an equally impressive array of procedural rules available, including rules for “comprehensive” arbitration (with an “expedited” option) or “streamlined” arbitration, class-action rules, and rules for construction, employment, international, consumer, and other types of disputes.

But even where parties have been deliberate about selecting a body of rules, they may give little or no consideration to what those rules actually say. Who wrote the rules being adopted? Are they balanced, or do they tend to favor petitioners or respondents (or the arbitration agency)? Do they lean toward efficiency or ensuring a full and fair opportunity to litigate one’s claims or defenses? It would not be going out on a limb to suggest that asking these questions, much less reviewing and comparing the available ready-made sets of procedural rules, is rarely, if ever, undertaken at the point of negotiating a contract.

Often an agreement to arbitrate will neither select an agency to administer the arbitration nor adopt a set of rules by which to arbitrate. Here too—and perhaps unwittingly—the parties are making choices about procedure. The Federal Arbitration Act (“FAA”)[1] and the Uniform Arbitration Act (“UAA”) adopted in Washington[2] and other states apply to virtually every arbitration. While these statutes primarily concern the enforcement of arbitration agreements and awards and cannot be altered by agreement, they also have implications for procedure as well, which can be altered. For instance, the UAA has provisions regarding arbitrator authority to subpoena witnesses and documents that imply a greater scope of discovery than that presumed under AAA rules[3]. Similarly, both statutes contain basic provisions about arbitrator neutrality and disclosures as a basis for vacating an award, but parties are free to agree on more specific or exacting standards.[4]

–Miles Yanick

Part Two | Part Three | Part Four