Thoughts on Non-Administered Arbitration

Non-administered arbitration (“NAA”) is an informal dispute resolution process designed to proceed without the involvement of a separate administering entity. The arbitrator and parties administer the proceedings.

The proceedings may be guided by a procedure the parties define, or the parties may agree to use institutional rules and procedures such as Rules for Non-Administered Arbitration published by the International Institute for “alternative” Conflict Prevention and Resolution (“CPR”). The objective is a dispute resolution process that is truly alternative – more efficient, flexible and expeditious than both adversarial litigation and formal administered arbitration.

I was recently an arbitrator in an NAA proceeding under the CPR Rules. This posting provides some of my reactions.

Avoid litigation in disguise

The effectiveness of the NAA alternative is only as good as the joint effort of all participants – the parties, their representatives and the arbitrator. Everyone involved in a non-administered arbitration proceeding must share the objective and make certain that the speed, flexibility and efficiency that the NAA process offers are realized and that the proceeding doesn’t devolve into litigation in disguise.

Parties who agree contractually to resolve their disputes in an NAA process seek a non-appealable, binding, just and fair result. That’s the low hanging fruit. Those contracting parties also deserve fruit higher up the tree – they deserve a dispute resolution proceeding that is focused, flexible, and less costly and time-consuming than formal administered arbitration or litigation. Everyone involved has an obligation to work to that end.

The approach

An important factor in meeting that obligation is how each participant approaches the NAA proceeding. Helena Tavares Erickson, a Senior Vice President at CPR, published an article on point some time ago (2006). Among her several valuable messages is the view that those involved must approach the dispute “as a problem to be solved, not a contest to be won.”

I agree. Contests to win are more expensive, more time consuming and less controllable than joint problem solving efforts. The benefits of an NAA proceeding are best realized in a problem solving context.

The schedule – agree and stick to it

As soon as the parties acknowledge the existence of a dispute to be arbitrated under NAA rules, they engage a mutually acceptable arbitrator. Then all concerned, including the arbitrator, should quickly (within days, not weeks or months) confer and agree to a date for a substantive hearing on the issues. This date should be written in stone, i.e., should be changed only (i) due to force majeure events and (ii) if and when not changing the date would mean genuine prejudice to a party.

The date should be realistic in terms of time needed for preparation. The original agreement which calls for dispute arbitration may provide unrealistic timing, e.g., 60 days to select and appoint an arbitrator and get to hearing on complicated factual/legal matters. It’s fine to override that prior agreement in the face of an actual dispute.

What shouldn’t be overridden is the clear intent of the parties to have the dispute heard and resolved quickly. Not getting to a substantive hearing on the merits of the dispute many months or more after arbitrator appointment is not the expeditious, economical dispute resolution process the parties originally bargained for.

Core issues – early identification and focus

Identification of the core issues in dispute, and early focus on those issues, can and should happen in arbitration, especially NAA. The flexibility to make this happen is a major advantage of the NAA process.

To get there, the parties and their representatives need to find the courage to work together to prioritize the factual and legal issues that comprise the dispute. This makes it possible to bring these core issues to the arbitrator for preliminary, non-binding review, or perhaps even for formal determination. Either way, the expertise of the arbitrator, the primary reason he/she was retained, is taken advantage of early on, and the possibility of mediation, or even settlement, of the entire dispute is increased.

If the parties and their representatives are reluctant to single out core issues for early scrutiny, the arbitrator should be ready to encourage them in that direction. The arbitrator needs to be sensitive to the time/cost value of bringing his/her expertise into the dispute in a constructive way early on.

This preliminary issue review requires two things:

1. Confidence on the part of the arbitrator — the ability to express a high level opinion (make a call) based on the experience and expertise that he/she is bringing to the table without first having to see every possible bit of data or hear every possible legal argument.
2. Parties and party representatives who are willing to listen and act on the arbitrator’s early stage opinion regardless of whether they agree that this preliminary arbitrator opinion is binding.

Atmosphere – informal, open

This is a challenge, especially for lawyers trained in the courtroom. I’m not suggesting that everyone arrive at each session in blue jeans and flip-flops. I am suggesting that the participants strive for an atmosphere that is conducive to problem solving, that fosters professionalism as well as mutual respect and friendliness, and that leaves room for important openness and listening.

For the parties and their representatives, this requires:

• Self-control in terms of what each participant brings to the table,
• Fewer motions and objections in response to what has been put on the table,
• The courage to make their own conscience-guided determinations of what is truly relevant and helpful to the effort, and
• Confidence that the arbitrator is good enough not to need formal motions in order to see every weakness in what has been presented.

For the arbitrator, this is about not letting evidentiary issues get in the way. Let your experience, judgment and expertise (the qualities that brought you to this proceeding in the first place) tell you what you don’t need to know or listen to in order to do your job.

The record – do we need one?

The reasons for making a record in a formal dispute resolution proceeding don’t exist in an NAA proceeding. There won’t be an appeal on the merits of the final award, so that’s not a reason. Preserving a possible challenge to the final award based on arbitrator conflict or bias is also not a valid reason for a record. The potential for such a challenge should be raised and resolved long before the proceeding commences. That leaves the possible need for a record for reference purposes for final briefing and arguments to the arbitrator, and the making of the record can be tailored to that need.

So, this is not to advocate that NAA proceedings not be recorded. I am suggesting that the participants first work together to determine why a record is needed. They should then tailor the making of the record to the identified need before engaging in the expense and the additional logistics of making a record of all evidentiary presentations.

CPR is a leading NAA advocate. Their website is a valuable tool for those interested.

In summary

To repeat –

1.    • The benefits of an NAA proceeding are best realized in a flexible, problem solving context.
      • The judicial process, the formal administered arbitration process, and all of the evidentiary and other rules and procedures that go along with those processes, are designed for          win-lose contests. They don’t allow for the flexibility that is an important benefit of an NAA proceeding, and they cost money and consume time.
      • Participants (parties, representatives and arbitrators) who are committed to the expediency and effectiveness of the NAA process must avoid engaging in litigation in disguise.            They should welcome and take full advantage of the flexibility that comes from working together to solve a problem.