Part Four: Arbitration in Evolution

This is the final installment in Disputing‘s series focused on sections of a research paper entitled, “Arbitration in Evolution: Current Practices and Perspectives of Experienced Arbitrators,” by Pepperdine University School of Law Professor Thomas Stipanowich and Straus Institute for Dispute Resolution Research Fellow Zachary Ulrich.  The article fully analyzes the data obtained in a groundbreaking 2013 survey regarding commercial arbitration practice in U.S. and international disputes.

This installment will consider survey “respondents’ experiences playing other third-party roles in dispute resolution, including rendering non-binding or advisory arbitration decisions, engaging in early neutral evaluation or early case assessment, and serving as a mediator,” and examine “perceptions of the efforts of institutional arbitration service providers to improve or maintain the quality of arbitration services and user satisfaction with arbitration.”  It will also explore “respondents’ expectations regarding trends potentially affecting arbitration practice,” discuss “perceived differences between U.S. and international arbitration practice,” and offer “respondents’ forecasts of the usage of various ADR processes in the coming decade.”

In this section of the paper, the authors first addressed “experienced arbitrators’ activities as dispute resolution professionals acting in various capacities.”  According to the survey results, about one-fourth of respondents “rendered an arbitration award that the parties had previously agreed would be non-binding or advisory.”  In addition, more than 42 percent stated they had “participated as an ‘early neutral evaluator’ of a case, or made a formal assessment or evaluation of the likely outcome of a case, as part of an early case assessment.”  Nearly 58 percent of experienced arbitrators served as a mediator “at least occasionally,” while “three out of five (60.1%) respondents to the CCA/Straus Institute Survey believed the growth of ‘mediation and other conflict management approaches’ was having a significant or moderate impact on their arbitration practice.”  About 83 percent of survey respondents “expected the use of mediation to increase in the future.”

Next, the authors addressed so-called Med-Arb:

There has long been a debate over whether mediators should assume the role of arbitrator in the event mediation does not resolve all of the issues in dispute, or whether a sitting arbitrator should accept the parties’ invitation to put on a mediator’s hat. In the United States and many other places, the traditional view has been that although dual-role “med-arb” may offer perceived benefits from the standpoint of increased efficiency (since a single individual is conducting the entire proceeding) and greater impetus to settle (since the mediator carries a “big stick” as the final adjudicator if negotiations fail), it is usually inadvisable since the roles of mediator and arbitrator “are very different in focus [and] in some respects incompatible.” However, there is evidence that dispute resolution professionals sometimes play multiple roles in helping to resolve a dispute.

After that, Professor Stipanowich and Mr. Ulrich focused on the role of provider organizations in the alternative dispute resolution context:

Over one-quarter of respondents (31 individuals, or 27.4% of the group) pointed to arbitral institutions’ regular revision and addition of procedural rules as a means by which they improve their services and user satisfaction. Many comments regarding service-providers’ rule changes focused on the ways in which new rules are aimed at making arbitration more efficient, cost- and time-effective. Further emphasizing the importance of adapting institutional arbitration procedures to constantly shifting “industry dynamics,” almost one-quarter (25 individuals, or 22.1%) indicated that providing continuing education and training opportunities for arbitrators on their panel was a means by which arbitration service providers improved their services and increased their value to users. Nine respondents (8.0%) emphasized that requiring ongoing training and education had increased the quality of panels in some institutions, particularly the American Arbitration Association (AAA). Another 16 respondents (14.2%) mentioned service-providers’ efforts to solicit and implement feedback from panelist and users, particularly regarding “arbitrators[’] performance,” “award form and quality,” as well as “periodic user surveys and focus groups to determine the parties’ and the lawyers’ level of satisfaction with the arbitration services.” A smaller minority (9 responses, or 8.0%) noted the “streamlining” of case facilitation; 7 responses (6.2%) mentioned institutions’ focus on user cost and time savings as means by which arbitral institutions have maintained or improved their services and user satisfaction. Arbitration-process efficiency was also the focus of another 7 responses (6.2%) emphasizing how service-provider staff have become increasingly active in monitoring ongoing cases; 6 responses (5.3%) spoke to the improved quality of case managers overall. A further 4 responses (3.5%) stated that arbitral institutions have maintained or improved their services and user satisfaction by placing an increased emphasis on minimizing discovery and by using administrative processes to ensure potential conflicts between parties and panelists are disclosed before panelists are selected. Much of the commentary spoke in general terms, although many respondents singled out particular provider institutions for their efforts to maintain or improve services and user satisfaction.

Survey respondents were also asked to identify potential areas for service provider improvement:

Responses touched on a wide range of topics. Eleven subjects (10.7% of the respondent pool) commented that arbitration service providers should continue present efforts. Another 9 individuals (8.7%) advocated for a general increase in the quality of case managers hired and staffed at arbitral institutions, encouraging providers to offer better compensation and benefits so as to minimize turnover while increasing hiring standards and training for those case managers currently on staff. In the same vein, 8 respondents (7.8%) each responded that improved communication between institution staff and panelists, including faster responses to arbitrators’ procedural questions, and shorter procedural deadlines—especially before and during panelist screening and selection—were important ways by which service providers could increase the quality of their services and raise user-satisfaction levels. Seven individuals (6.8%) wrote that current arbitration panels should have more stringent admission requirements, or that panelists should be able to rate one another using a system to inform panelist retention decisions. Five individuals (4.9% of the respondent pool) commented that institutions should increase opportunities for panelist feedback from users, while another 4 individuals (3.9%) stated that panelists should be able to have ways of limiting the efforts of litigation-oriented counsel to treat arbitral processes as they would a trial, including limitations on discovery. There were a number of other topics touched upon by multiple respondents, including differing perspectives on the issue of diversity.

The authors next moved on to address trends affecting commercial arbitration practice in the United States as well as many perceived differences between domestic and international arbitration.  Survey respondents were also queried regarding their thoughts on “the relative usage of various dispute resolution methodologies during the coming decade.”  Professor Stipanowich and Mr. Ulrich found,

A large majority of the group (106 respondents, or 82.8% of the group) expected mediation to see increasing use. Majorities also anticipated growth in the use of customized dispute resolution processes (67.2%); fast track (“streamlined”) arbitration (64.8%); single-arbitrator processes (56.3%); multi-step processes (52.3%) and online arbitration (50.8%). Large minorities expected more use of appellate arbitration processes (45.3%), B2B arbitration (43.8%), early case assessment (39.1%), and non-administered arbitration (36.7%).

On the other hand, there were a few situations in which a relatively sizeable number of respondents forecast decreasing use. These included consumer arbitration (34.4% predicted a decrease, as compared to 30.5% who predicted an increase), non-binding arbitration (26.6% predicted a decrease, as compared to 8.6% who predicted an increase), and med-arb (with the same neutral playing both roles) (23.4% predicted an increase, as compared to 18.0% who predicted an increase).

Finally, the authors summarized many of the key insights gained through their landmark survey.  Professor Stipanowich and Mr. Ulrich concluded their research paper by stating,

Although we may still perceive the realities of commercial arbitration “as through a glass, darkly,” the CCA/Straus Institute Survey is an important step toward lifting the veil and illuminating this continuously evolving sphere of activity.

For additional information, we invite you to read parts One, and Two, and Three of this series.

In addition to reviewing the authors’ entire article, Professor Stipanowich’s companion paper entitled, “Reflections on the State and Future of Commercial Arbitration: Challenges, Opportunities, Proposals,” provides readers with additional context and insights into this groundbreaking research.

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