Arbitration does not automatically involve administration by a neutral third-party organization. Selection of the arbitration administrator will have a significant impact on the fairness, neutrality, speed, compliance with law and contract and costs of achieving an arbitrated resolution of a commercial dispute. Wise selection of arbitration administrators assures the best chance of an appropriate outcome in arbitration.
Why Designate an Arbitration Administrator
Arbitration administrators perform functions that can only be done by neutrals with authority to require the parties to follow some form of rules in alternative dispute resolution (“ADR”) that does not go to the courts. The administration of an arbitration involves the administrator at every step, including:
- receipt of the demand for arbitration and “starting the clock” on procedures;
- defining deadlines for the parties in the preparation for hearings before the arbitrator(s);
- the process for the selection of the arbitrator(s), particularly as to suitability, competence, prior training in serving as an arbitrator, expertise in the subject matter of the dispute and freedom from conflicts of interest or a history of actions that may result in judicial invalidation of the arbitral award for lack of “fairness” or “due process”;
- decision making as to administrative requests and needs of the parties that do not involve any decision making on the merits of the dispute;
- coordinating schedules for the arbitrators and the parties;
- providing a venue for the parties to present their arguments;
- promoting the judicial acceptance of arbitral awards by
- adopting predictable uniform rules of arbitration for the parties and arbitrators to follow, while allowing the parties reasonable flexibility to define, in the arbitration clauses in their contracts or in separate “terms of reference”, the qualifications required for the arbitrator(s), the arbitral venue and the basic procedures for communications and pleadings;
- certifying the text of the arbitral award; and
- reviewing the arbitral award as to compliance with formats and basic disclosures so that the awards may be docketed in court for judicial enforcement.
Some arbitrations occur without any administration by a neutral organization. To some extent, lack of administration can result in unilateral nullification of the arbitral process, resulting in confusion, delays, additional costs and frustration of justice.
Whom to Designate
In the selection of an arbitration administrator, the parties need to evaluate the administrator’s reputation for neutrality, diligence and effectiveness. The rules that define the roles, and the availability of agreed exceptions to the rules, make a fair and level playing field for dispute resolution.
International Arbitration
The importance of selecting an appropriate administrator is seen in international disputes. In a few countries, the local government is highly involved behind the scenes in the oversight of arbitration administrators, which could result in favoritism for local parties.