Creative American Arbitration Association (AAA) Procedure Offers Cost-Savings for Three-Arbitrator Panels

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The American Arbitration Association (“AAA”) has announced on its website that it is offering a “Streamlined Three-Arbitrator Panel Option” for large, complex cases. It’s a fresh idea that is worthy of parties’ consideration in cases where the rules (see Section L-2(a)) or the parties’ agreement requires a panel of three arbitrators to hear and decide the case. The Streamlined Three-Arbitrator Panel Option allows a single arbitrator to work with the parties in moving the case through the preliminary and discovery stages. A full panel participates in the evidentiary hearing and in rendering the final award.

Three-arbitrator panels offer distinct advantages but they are very expensive. The AAA states that it “has found that a three-arbitrator panel can actually cost five times as much as a single arbitrator.” That disparity will shock some but it rings true to my experience. Why are the parties willing to pay so much more? Sophisticated parties place a high value on the opportunity for each party to select one of the arbitrators on the panel and to participate, directly or indirectly, in the selection of the chairperson. Some also believe that three arbitrators are less likely than a sole arbitrator to overlook evidence, controlling law or compelling arguments or to otherwise reach an imperfect result.

It will be interesting to see to how this option is embraced by users and the community of arbitrators. Unquestionably, important rulings do occur in the early stages of an arbitration concerning, for instance, bifurcation, joinder, whether the filing dispositive motions will be permitted, and the scope of discovery. Again my experience, the two “wingmen” make highly valuable contributions in deciding such issues – and they are better prepared for the hearing as a result. What I like about the “Streamlined” option is that it gives the parties themselves the opportunity to design a process the best suits the needs of their particular case. They are in the best position to judge whether the Streamlined Three-Arbitrator Panel Option will work well for their arbitration.


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