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What to Expect (and What Not to Expect) in Commercial Arbitration

Going to arbitration can be an effective means of resolving a wide variety of commercial disputes. Arbitration provides a binding resolution (unlike mediation), but it costs less in terms of both money and operational resources than litigation. Since arbitration proceedings are private, they also avoid the publicity of trial—as well as the risk that evidence, pleadings and statements made on the record could be used by other parties in subsequent proceedings.

In short, when dealing with a business-related contentious dispute, arbitration can make a lot of sense as an alternative to commercial litigation. With that said, arbitration isn’t necessarily the best choice in all circumstances. In this article, our attorneys provide an overview of the commercial arbitration process and set some reasonable expectations for those considering arbitration as a means for resolving a dispute in the commercial setting

The Commercial Arbitration Process: An Overview

If you are familiar with the litigation process, the easiest way to think about arbitration may be to think of it as a streamlined version of going to trial. While there are some major – and important differences – arbitration is ultimately a formalized dispute resolution proceeding that results in an outcome that is binding for both parties.

While different arbitration providers have different procedures and requirements, the overall process of pursuing arbitration has become relatively standardized. Generally speaking, the major steps in the process are as follows:

1. Filing (and Payment of the Filing Fee)

The arbitration process begins when one party files a Demand for Arbitration. When filing the demand, this party must also pay the arbitration provider’s filing fee. You can learn about the AAA and JAMS’s filing fees here:

Keep in mind that absent an agreement, submission to arbitration is not required. So, before pursuing arbitration, commercial parties should ensure that either (i) they have a binding arbitration agreement in place or (ii) they have made arrangements to pursue arbitration as an alternative to litigation.

2. Selection of the Arbitrator (or Arbitration Panel)

After the filing of the Demand for Arbitration and the respondent’s initial response, the next step is to select an arbitrator or arbitration panel. Arbitration panels typically consist of three arbitrators and are most often used in complex and high-value cases. If the parties cannot agree on the arbitrator (or arbitrators) who will hear their case, then the arbitration provider will make a decision for them.

3. Preliminary Hearing

With an arbitrator (or arbitration panel) selected, the next step is to attend a preliminary hearing. While certain substantive matters may be addressed during this hearing, one of the main purposes of the hearing is to set the schedule for the remainder of the proceedings. If the parties foresee any issues with discovery, they may raise these issues at the preliminary hearing as well.

4. Discovery

Arbitration involves a discovery process, similar to litigation. However, discovery in arbitration is typically far more condensed and far less wide-reaching. If the parties have any disagreements regarding discovery that they are not able to resolve on their own, they can seek a decision from the arbitrator (or arbitration panel).

5. Mediation and/or Settlement Negotiations

In commercial arbitration, the parties may be required to try mediation before going to a hearing—though both parties typically have the right to opt-out unless otherwise agreed. The parties also have the ability to enter into settlement negotiations at any time. It is not uncommon for disputes submitted to arbitration to result in pre-hearing settlements.

6. Arbitration Hearing

If the parties have not settled their dispute, the next step is to attend the arbitration hearing. This is similar to a mini-trial, with both parties’ counsel presenting arguments and evidence in support of their client’s position.

7. Post-Hearing Submissions

Following the arbitration hearing, one or both parties’ counsel may seek to make post-hearing submissions. These submissions can address issues arising during the hearing, damages calculations and other pertinent matters.

8. Arbitration Award

After considering any post-hearing submissions, the arbitrator (or arbitration panel) will issue the arbitration award. The arbitration award is a binding decision—subject to both parties’ right to appeal.

9. Appeal

Arbitration awards can be challenged in court in certain circumstances. The Federal Arbitration Act establishes grounds to vacate an arbitration award, and the outcomes of arbitration proceedings can be challenged on various common law grounds as well.

10. Enforcement

Following completion of the arbitration process, the prevailing party can pursue judicial enforcement of the arbitrator’s (or arbitration panel’s) award if necessary.

What Not to Expect in Commercial Arbitration

In addition to knowing what to expect from the commercial arbitration process, parties considering arbitration need to know what not to expect from the process. For example, here are some important considerations:

  • Arbitration Does Not Produce a Quick Resolution – While the timeline in arbitration is generally shorter than the timeline in litigation, arbitration does not necessarily produce a “quick” resolution. The AAA’s timeline, for example, typically involves the parties receiving a final decision 258 to 288 days following the initiation of the process.
  • There Are No Guarantees of Settlement – While many commercial disputes settle during arbitration, there is no guarantee that the parties will reach a settlement. Even though one of the goals of arbitration is to narrow down the issues and help each side see the other’s point of view, the fact that arbitration is relatively low-cost means that parties will more often be willing to see the process through to its conclusion.
  • The Arbitrator’s (or Arbitration Panel’s) Decision Isn’t Necessarily the Final Outcome – Just like a trial verdict, an arbitration award is subject to appeal on various grounds. If either party is unsatisfied with the arbitration award, the parties could still end up in litigation.

Discuss Your Commercial Dispute with an Attorney at Edelboim Lieberman Revah

If you need to know more about the benefits and limitations of commercial arbitration, we invite you to get in touch. To discuss your commercial dispute with an attorney at Edelboim Lieberman Revah, please call 305-768-9909 or request an appointment online today.

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