Parties to a dispute often cite cost control as a reason for choosing arbitration over litigation. To achieve the goal of keeping arbitration costs down, it is important for counsel to play an active role in advocating for cost control. Without counsel’s vigilant attention from the outset of the case, arbitration costs can rival litigation expenses. This is especially true international arbitrations where parties, counsel, and arbitrators hail from different parts of the world.
There are several cost reduction strategies that counsel can suggest at the first arbitration case management conference. Not every strategy is appropriate for every case and every party; counsel and client should spend time before the initial case management call discussing specific cost reduction strategies and their usefulness to the dispute at hand.
Discovery provides myriad opportunities for cost reduction. Counsel is well-advised to step out from behind the lens of American legal practice to ascertain what discovery is necessary and appropriate international arbitration. The utility of depositions — the hallmark of American discovery — may be outweighed by cost in terms of both preparation and travel time. Some international arbitration rules expressly disfavor depositions. The need for interrogatories and requests for admissions should be carefully examined as well.
Counsel should also brainstorm strategies for limiting document discovery, and in particular e-discovery, which is the source of ballooning litigation costs in the United States. The American procedure of exchanging requests, lodging objections, and then requesting the judge/arbitrator’s intervention is too time-consuming for arbitration. I suggest that each party present a certain number of document requests with a short written justification for each request to the arbitrator for approval or rejection. Parties should exchange only those documents that are not readily accessible to the other party.
Parties can also save costs by delegating the chore of resolving discovery disputes to the panel chairman in arbitrations with a three-member panel. Involving all three panel members in every discovery dispute — however minor — will increase arbitrators’ fees exponentially. Since the “arbitrator fee” budget line item is unique to arbitration, it is important to be sensitive to its role in driving up overall arbitration costs.
Discovery is not the only area ripe for cost reduction. Bifurcation of the case should be discussed on the initial case management call. Cases are most often bifurcated along the issues of liability and damages, but counsel need not stop there when suggesting a phased arbitration. If there is an issue of contract interpretation, for example, that would dispose of several claims (and perhaps encourage settlement) if decided early on, then by all means counsel should consider suggesting an expedited hearing on that issue.
With careful advance planning, cost reduction strategies can also be employed at the arbitration hearing itself. Direct testimony can be offered in the form of written witness statements provided in advance of the hearing. Witnesses submitting written statements can appear for cross-examination in person, or if more convenient and cost-effective, by video-conference.
Arbitral rules tout efficiency — from both a cost and time perspective — as a major benefit of choosing arbitration over litigation, so counsel’s entreaties concerning cost reduction should be met with a warm reception from arbitrators and administrators. There is an inevitable tension between efficiency and ensuring that all parties have a fair opportunity to present their case, but that tension is one that can be resolved by careful, creative case management and the diligence of counsel.