2006/Vol. 5 No.1 - Hamline Law - Hamline University

THE
JOURNAL
OF
AMERICAN
ARBITRATION
2006/Vol. 5 No.1

Article
Arbitration: The Basics
Joseph L. Daly ∗
I. INTRODUCTION...........................................................................3
II. A HISTORICAL OVERVIEW OF ARBITRATION ................................3
A. Historical Precedents and the Development of Modern
Arbitration................................................................................3
B. Enactment of the Federal Arbitration Act...................................7
III. OBJECTIVES OF ARBITRATION ...................................................10
IV. HOW ARBITRATION BEGINS ......................................................12
A. The Agreement to Arbitrate......................................................12
B. The Arbitration Clause ............................................................14
V. INITIATING THE ARBITRATION ...................................................19
A. Arbitration Agency or Ad Hoc Proceeding...............................20
B. Notifying the Arbitration Agency of Request for Arbitration.....28
C. Choosing the Arbitrator...........................................................29
D. Notification Requirements........................................................31
E. Scheduling...............................................................................32
F. Arbitrator Disclosure Requirements.........................................33
∗ Professor of Law, Hamline University School of Law; Arbitrator for the
American Arbitration Association (Labor, Commercial & International) and for the
US Federal Mediation and Conciliation Service (Labor). © Joseph L. Daly (2006).
The author thanks Hamline Law students Michael Maza, Katie Thoennes, and Katy
Bowen for their valuable research assistance.
The Journal of American Arbitration © 2006 by Thomas Carbonneau and JurisNet, LLC

2 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
G. Tendency to Delay ...................................................................35
H. Time Required .........................................................................36
VI. PRE-ARBITRATION MATTERS ....................................................36
A. Discovery ................................................................................36
B. Subpoena Power of Persons and Materials..............................37
C. Pre-Hearing Issues..................................................................40
VII. THE HEARING ..........................................................................45
A. The Place ................................................................................45
B. Marking Exhibits and Other Preliminary Matters ....................47
C. The Evidence...........................................................................48
D. Theory of the Case...................................................................49
E. Opening Statement...................................................................50
F. Burden of Proof .......................................................................50
G. Swearing the Witnesses............................................................52
H. Out of Sequence Witnesses.......................................................52
I. Direct Examination..................................................................52
J. Use of Visuals ..........................................................................53
K. Cross Examination ..................................................................53
L. Redirect Examination ..............................................................54
M. Re-Cross Examination.............................................................55
N. Hyper-Aggressive Advocates....................................................55
O. Closing Arguments versus Post-Hearing Briefs........................56
VIII. THE DECISION..........................................................................57
A. Use of the Contract, the Law, and Public Policy ......................57
B. The Requirement of a Reasoned Decision ................................58
C. Procedural Requirements for a Decision..................................60
D. Sending the Decision to Reporting Bodies................................60
E. Ability to Appeal an Arbitration Decision ................................61
IX. PROBLEMS WITH ARBITRATION .................................................64
A. Adhesive Nature of the Contract ..............................................64
B. The Problem of Neutrality........................................................65
C. Limited Discovery for Even Complex Cases.............................68
D. Process Too Complicated, Too Slow, Too Expensive .................69
E. Non-Lawyer Oriented..............................................................71
F. Arbitrability of Statutory Rights ...............................................72
G. Lack of Transparency...............................................................74
H. Arbitrator’s Lack of Power and Control...................................75
I. Punitive Damages are Unusual Even when the Facts Warrant .75
J. No Better Result Than Litigation..............................................76
K. No Review or Appeal ...............................................................76

2006] ARBITRATION: THE BASICS 3
L. Is the Process of Arbitration to Achieve a Final Decision or to
Seek Truth and Find Justice ....................................................78
X. CONCLUSION............................................................................78
I. INTRODUCTION
This is a description of the process of arbitration in the United
States. It will focus on the basics of arbitration: its history; its objectives;
its scheduling; how the process begins; pre-arbitration matters; the
hearing; the award; and the problems with arbitration. The goal of this
article is simple and straightforward: to explain the basics of the
arbitration process used in the United States.
II. A HISTORICAL OVERVIEW OF ARBITRATION
A. Historical Precedents and the Development of Modern
Arbitration
Arbitration is not a recent phenomenon; in fact, arbitration as a
method for resolving disputes has a long and complex history. King
Solomon’s decision to “split the baby” is the first recorded arbitration
decision. 1 Thankfully, Solomon’s award to cut the baby in half was not
executed. Once the loving mother offered to give up the child so the
baby would live, Solomon wisely awarded the child to her. 2 The use of
arbitration rapidly expanded in the formal law of the Romans, in early
Judeo-Christian communities, in Islamic law, and in the settlement of
1. 1 Kings 3:16-28. King Solomon is known for the judgment he passed when
two women came before him both claiming to be the mother of the same child. Id.
After each woman pleaded with him to giver her the child:
And the king said, Bring me a sword. And they brought a sword before the king.
And the king said, Divide the living child in two, and give half to the one, and half
to the other. Then spake the woman whose the living child was unto the king, for
her bowels yearned upon her son, and she said, O my lord, give her the living child,
and in no wise slay it. But the other said, Let it be neither mine nor thine, but divide
it. Then the king answered and said, Give her the living child, and in no wise slay
it: she is the mother thereof. And all Israel heard of the judgment which the king
had judged; and they feared the king: for they saw that the wisdom of God was in
him, to do judgment.
Id. at 3:24-28.
2. Id.

4 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
commercial disputes of the Middle Ages. 3
In early America, the use of arbitration to resolve disputes predates
the United States government and, thus, the establishment of the federal
3. DENNIS NOLAN, LABOR ARBITRATION LAW AND PRACTICE 2-3 (West
Publishing Co. 1979); see Randy Linda Sturman, House of Judgment: Alternative
Dispute Resolution in the Orthodox Jewish Community, 36 CAL. W. L. REV. 417,
418 (2000). For thousands of years, Jewish communities have made use of an
alternative dispute resolution process known as the Bet Din, meaning “house of
judgment.” Id. The Bet Din involves resolution of a dispute by a single rabbi or a
panel of three rabbis. Id. Unlike arbitration, the parties have to agree to the
process, since there is generally no contractual clause involved. Id. The parties
agree to arbitrate for various reasons, such as “social pressure or religious
convictions.” Id. The purpose of the Bet Din is the resolution of disputes by peers
or other members of the Jewish community who have similar cultural beliefs and
values. Id.
For a discussion of arbitration in the Middle Ages, see Michael Clanchy,
Law and Love in the Middle Ages, in DISPUTES AND SETTLEMENTS: LAW AND
HUMAN RELATIONS IN THE WEST 52 (John Bossy ed., Cambridge Univ. Press 1983).
The approach used by Louis IX in the Middle Ages to settle disputes is described by
the following romanticized passage:
The atmosphere is relaxed: the king sits at the foot of his bed, or in summer with
his back against an oak in the Bois de Vincennes, or on a carpet in the Jardin de
Paris without any head covering other than a cap of white peacock’s feathers.
Litigants come forward without formality and the king himself asks them, ‘Why
don’t you take what our people offer you?’ When they reply that the offers are too
little, the king does everything he can to ‘put them on a right and sensible
course.’. . . [T]he method of adjudication is one of ‘delivering’ the litigants from
their toils through discussion and bargaining.
Id.
For a discussion of arbitration in Islamic law, see Sarvenaz Bahar,
Khomeinism, the Islamic Republic of Iran, and International Law: The Relevance of
Islamic Political Ideology, 33 HARV. INT’L L.J. 145, 167 (Winter 1992) (stating that
arbitration “found a place in the verses of the Qur’an as a respected Muslim
tradition: O you who believe! Obey Allah, and the Apostle and those in authority
among you; if you differ, bring it before Allah and the Apostle, if you believe in
Allah and in the last day. (Qur’an 4:59)”); Charles N. Brower & Jeremy K. Sharpe,
International Arbitration and the Islamic World: The Third Phase, 97 AM. J. INT’L
L. 643, 643 (July 2003).
Shortly after the founding of Islam, the Treaty of Medina of 622 A.D. (a
security pact among the city’s Muslims, non-Muslim Arabs, and Jews) called for
arbitration of any disputes by the Prophet Muhammad. Indeed, the Prophet himself
resorted to arbitration in his conflict with the tribe of Banu Qurayza. Muslim rulers
subsequently followed his example, notably in the disastrous arbitration between
Muawiyah (the governor of Syria) and the Caliph Ali (the Prophet’s son-in-law) in
659 A.D. . . . [which] made permanent Islam’s enduring split into the Shiite and
Sunni branches. Id.

2006] ARBITRATION: THE BASICS 5
court system by the U.S. Constitution. Native American tribes used a
hybrid form of arbitration/mediation (Arb-Med) as a tool for dispute
resolution. 4 Additionally, religious communities in the colonial period
developed many creative dispute resolution mechanisms such as “gospel
order,” “brotherly fashion,” and “arbitration” for resolving conflicts. 5
The first U.S. President, George Washington, mandated arbitration rather
than litigation if his will was challenged. 6 Arbitration has been used in
4. NOLAN, supra note 3, at 2-3; see, e.g., Matt Arbaugh, Making Peace the Old
Fashioned Way: Infusing Traditional Tribal Practices in Modern ADR, 2 PEPP.
DISP. RESOL. L.J. 303, 303 (2002). The traditional method used by many Native
Americans to resolve disputes is known as peacemaking. Id. The focus of the
peacemaking process is on saving relationships and finding a solution that is
acceptable to all. Id. The goal is to solve the problem causing the dispute rather
than on awarding remedial measures or punishing the parties. Id. at 309. See, e.g.,
Sandra Day O’Connor, Lessons from the Third Sovereign: Indian Tribal Courts, 33
TULSA L.J. 1, 4 (1997). Certain Native American Tribal Courts have incorporated
traditional mediation into modern legal institutions. Id. The Navajo Peacemaker
Court, for example, implements a process—
[D]irected by a mediator, who acts to guide and encourage the parties to resolve
their dispute. The process relies on parties’ participation and their commitment to
reaching a solution, rather than on the imposition of a judgment by an impersonal
decisionmaker in order to reach a successful conclusion.
Id.
5. Robert M. Ackerman, Disputing Together: Conflict Resolution and the
Search for Community, 18 OHIO ST. J. ON DISP. RESOL. 27, 46-47 n.58 (2002). In
Puritan communities, arbitration was the first step in a multistage process to resolve
disputes. Id. If arbitration failed, the parties then relied on elders, the minister, or
others in the community to help them come to a resolution. Id. The Quakers had a
similar process called a “gospel order.” Id. This process required parties to come to
an agreement in a “brotherly fashion.” Id. If this method failed the parties would
submit the dispute to arbitration by disinterested members of the community. Id.
Punishment for failure to accept the ruling of the arbitrators resulted in
excommunication. Id.
6. James R. Deye & Lesly L. Britton, Arbitration By the American Arbitration
Association, 70 N.D. L. REV. 281, 289 n.52 (1994) (citing MARTIN DOMKE, DOMKE
ON COMMERCIAL ARBITRATION at 187-88 (Rev. ed. 1991)). The portion of George
Washington’s will providing for arbitration reads:
“But having endeavored to be plain and explicit in all the [d]evises—even at the
expense of prolixity, perhaps tautology, I hope, and trust, that no disputes will arise
concerning them; but if contrary to expectation the case should be otherwise from
the want of legal expression, or the usual technical terms, or because too much or
too little has been said on any of the devises to be consonant with law, my will and
direction expressly is, that all disputes (if unhappily any should arise) shall be
decided by three impartial and intelligent men, known for their probity and good
understanding; two to be chosen by the disputants, each having the choice of one,

6 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
commercial disputes for hundreds of years. 7 Management and unions
have used contractual arbitration to resolve labor disputes for decades. 8
Arbitration gained considerable popularity in the United States in
the 1920s when Wall Street pressed Congress to endorse arbitration as an
alternative dispute resolution mechanism to resolve equities disputes. 9
During the “Roaring 20s,” there were long delays in trying cases in the
court systems of the state of New York. 10 Equities traders and buyers
needed quicker dispute resolution. The traders convincingly argued that
speed in the resolution of conflict facilitates business. A free market
trading system prefers efficiency, economy, speed, and fairness in the
resolution of conflict. 11 “The business of business is business,” not
lawsuits. 12
and the third by those two—which three men thus chosen shall, unfettered by Law,
or legal constructions, declare their sense of the [t]estator’s intention; and such
decision is, to all intents and purposes, to be as binding on the [p]arties as if it had
been given in the Supreme Court of the United States.”
Id. (quoting George Washington’s will).
7. Lee Korland, What an Arbitrator Should Investigate and Disclose:
Proposing a New Test for Evident Partiality Under the Federal Arbitration Act, 53
CASE W. RES. L. REV. 815, 817 (2003) (noting that arbitration was used in several
of the original U.S. colonies even prior to the American Revolution).
8. Lewis L. Maltby, Private Justice: Employment Arbitration and Civil Rights,
30 COLUM. HUM. RTS. L. REV. 29, 30 (1998) (“For decades, private arbitration has
been the vehicle of choice for unions, and it has worked well in this context.
Although unions are free to withdraw from arbitration, it is virtually unheard of for
a union to do so.”).
9. See Sarah Rudolf Cole, Incentives and Arbitration: The Case Against
Enforcement of Executory Arbitration Agreements Between Employers and
Employees, 64 UMKC L. REV. 449, 465 (1996) (“Businessmen grew to favor
arbitration not only because it offered them autonomy from governmental
regulation, but also because it allowed for a faster and more reliable means of
dispute resolution.”).
10. See id. During this period, there was an increase in governmental regulation
as the nation’s agricultural economy transformed into an urban industrial economy.
Id. There was a subsequent increase in litigation because of the regulation, resulting
in “extreme congestion and delay [in the court system] accompanied by high costs,
inflexible procedures, and obsolete law.” Id.
11. See American Arbitration Ass’n, Executive Summary, Dispute-Wise sm
Business Management: Improving Economic and Non-Economic Outcomes in
Managing Business Conflicts 5 (2003), available at http://www.adr.org/dw/ES.pdf
(last visited Dec. 8, 2005).
12. The quote, “the business of business is business” is usually attributed to
Milton Friedman as a result of his seminal article on business ethics. Milton
Friedman, The Social Responsibility of Business Is to Increase Its Profits, N.Y.

2006] ARBITRATION: THE BASICS 7
B. Enactment of the Federal Arbitration Act
Despite historical and statutory acceptance, arbitration faced
opposition in the courts because it seemingly usurped judicial authority.
English courts were loath to accept arbitration agreements, 13 and this
reluctance then carried to American courts. 14 Congress, in response to
Wall Street’s urging, 15 enacted the Federal Arbitration Act (FAA) 16 in
1925 to combat this judicial hostility. 17
The FAA makes arbitration agreements enforceable like any other
contract. 18 Section 2 of the Act provides:
A written provision in any maritime transaction or a contract
evidencing a transaction involving commerce to settle by
arbitration a controversy thereafter arising out of such contract or
transaction . . . shall be valid, irrevocable, and enforceable, save
upon such grounds as exist at law or in equity for the revocation
TIMES MAG., Sept. 13, 1970, at 32.
13. See Scott v. Avery, 25 L.J. EX. 308, 313 (H.L. 1856) (Campbell, L.J); James
P. Buchele & Larry R. Rute, The Changing Face of Arbitration: What Once Was
Old Is New Again, 72-AUG J. KAN. B.A. 36, 37 (2003). Judicial hostility towards
arbitration dates back to the English common law of the 17th and 18th centuries.
Id. Judges, fearing that their salaries would be reduced if arbitration grew
widespread, developed the “ouster doctrine” which held that agreements to arbitrate
were revocable until an award was issued. Id.
14. See THOMAS E. CARBONNEAU, CASES AND MATERIALS ON THE LAW AND
PRACTICE OF ARBITRATION 49 (rev. 3d ed. 2003); see also Buchele & Rute, supra
note 13, at 37. The hostility of the English courts toward arbitration was carried
into the American colonies, and arbitration agreements were usually unenforceable
until the FAA was enacted. Id.; see also Cole, supra note 9, at 462-66.
15. See Cole, supra note 9, at 465-66 (noting passage of New York arbitration
statute in 1920 with support from a coalition of lawyers and businessmen, and
introduction of the FAA in the U.S. House of Representatives by Congressman
Mills of New York).
16. 9 U.S.C. §§ 1-16, §§ 201-208, §§ 301-307 (2000). Chapter one, §§ 1-16,
deals with domestic arbitration. Chapters two and three, §§ 201-208 and §§ 301-
307, respectively, cover arbitration proceedings in an international context.
17. See Roger J. Perlstadt, Timing of Institutional Bias Challenges to
Arbitration, 69 U. CHI. L. REV. 1983, 1983 (2002) (quoting Gilmer v.
Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991) (“Congress enacted the
Federal Arbitration Act (FAA) ‘to reverse the longstanding judicial hostility to
arbitration agreements that had existed at English common law and had been
adopted by American courts.’”)).
18. Scherk v. Alberto-Culver Co., 417 U.S. 506, 511 (1974) (stating that the
FAA was designed to put arbitration agreements on “the same footing as other
contracts”).

8 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
of any contract. 19
The United States Supreme Court extended the application of the
FAA, making the provisions applicable to arbitration agreements
executed pursuant to state law. 20 The Court asserted that any state that
attempts to invalidate arbitration agreements under state laws applicable
only to arbitration provisions will be met with opposition by the FAA. 21
In Allied-Bruce Terminix Companies v. Dobson, the Court recognized
that, “States may regulate contracts, including arbitration clauses, under
general contract law principles.” 22 But “[w]hat States may not do is
decide that a contract is fair enough to enforce all its basic terms (price,
service, credit), but not fair enough to enforce its arbitration clause.” 23
Despite the enactment of the FAA with its strong policy favoring
arbitration, some federal and state courts still refused to enforce
arbitration agreements. 24 But, in 1974, the judicial hostility toward
19. 9 U.S.C. § 2 (1994) (emphasis added); see Allied-Bruce Terminix Cos. v.
Dobson, 513 U.S. 265, 273-74 (1994). The Court adopted a broad interpretation of
the phrase “involving commerce.” Id. The Court noted that “a broad interpretation
of this language is consistent with the Act’s basic purpose, to put arbitration
provisions on ‘the same footing’ as a contract’s other terms.” Id. at 275 (quoting
Scherk, 417 U.S. at 511).
20. Southland Corp. v. Keating, 465 U.S. 1, 16 (1984) (“In creating a
substantive rule applicable in state as well as federal courts, Congress intended to
foreclose state legislative attempts to undercut the enforceability of arbitration
agreements.”).
21. Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996).
22. Allied-Bruce, 513 U.S. at 281; see also Casarotto, 517 U.S. at 686-87
(holding that “the text of § 2 declares that state law may be applied ‘if that law arose
to govern issues concerning the validity, revocability, and enforceability of
contracts generally.’ . . . Thus, generally applicable contract defenses, such as fraud,
duress, or unconscionability, may be applied to invalidate arbitration agreements
without contravening § 2.”).
23. Allied-Bruce, 513 U.S. at 281; Casarotto, 517 U.S. at 688 (quoting Scherk,
417 U.S. at 511 (1974) (stating that “[b]y enacting § 2, . . . Congress precluded
States from singling out arbitration provisions for suspect status, requiring instead
that such provisions be placed ‘upon the same footing as other contracts.’”)).
24. Stephen J. Ware, Basic Principles of Arbitration Law: Successful
Challenges to Arbitration Agreements, in ARBITRATION OF CONSUMER FINANCIAL
SERVICES DISPUTES 1999, at 797, 802 (PLI Corporate Law Practice, Course
Handbook Series No. B0-00C2, 1999); see, e.g., Wilko v. Swan, 346 U.S. 427, 438
(1953) (“[T]he intention of Congress concerning the sale of securities is better
carried out by holding invalid such an agreement for arbitration.”); Rueda v. Union
Pac. RR. Co., 175 P.2d 778, 782 (Or. 1946) (stating that, with respect to agreements
to arbitrate future disputes, “the ancient common-law hostility to agreements
‘ousting the courts of jurisdiction’ becomes manifest, and it is often held that one

2006] ARBITRATION: THE BASICS 9
arbitration turned to support when the Supreme Court held that an
arbitral forum would be just as fair as a courtroom for parties to an
international agreement who had agreed to arbitrate a securities fraud
claim pursuant to U.S. law. 25 Since the decision in Scherk v. Alberto-
Culver Co., the Supreme Court has “taken an active interest in promoting
party recourse to arbitration and in protecting the autonomy and
operation of the arbitral process,” 26 relying on the “liberal federal policy
favoring arbitration agreements.” 27 Today, public policy in the United
States favors arbitration as a valid and legal means of resolving
disputes. 28 And, because of the judiciary’s stringent support of
arbitration as a means to resolve all types of disputes, “[t]here is virtually
no subject-matter inarbitrability defense to the enforcement of arbitral
agreements and awards under U.S. law.” 29
The use of arbitration to settle disputes is now widespread and is a
standard feature in business, consumer, and employment contracts.
International and national businesses view it as an essential tool to
control the costs of resolving a dispute and preserve current and future
business relationships. 30 Between 1998 and 1999, the American
Arbitration Association (AAA) saw a fifty percent increase in arbitration
filings, bringing the number of mediations and arbitrations conducted by
the AAA in that year to 140,188. 31 By September 2005, the total number
may bring an action in court without complying with the agreed arbitral
procedure”); Vitaphone Corp. v. Elec. Research Prod., Inc., 166 A. 255, 261 (Del.
Ch. 1933) (“Courts here and elsewhere are opposed to being ousted of jurisdiction
by the agreement of parties to an arbitration.”).
25. Scherk, 417 U.S. at 519-20 (holding that “any dispute arising out of their
international commercial transaction is to be respected and enforced by the federal
courts”).
26. CARBONNEAU, supra note 14, at 243.
27. Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24
(1983).
28. See Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002)
(quoting Moses H. Cone, 460 U.S. at 24) (“[T]he Court has also long recognized
and enforced a ‘liberal federal policy favoring arbitration agreements.’”); JLM
Indus., Inc. v. Stolt-Nielsen, 387 F.3d 163, 171 (2d Cir. 2004) (quoting Hartford
Accident & Indem. Co. v. Swiss Reinsurance Am. Corp., 246 F.3d 219, 226 (2d Cir.
2001)) (“The FAA expresses ‘a strong federal policy favoring arbitration.’”); Masco
Corp. v. Zurich Am. Ins. Co., 382 F.3d 624, 627 (6th Cir. 2004); Register v. White,
599 S.E.2d 549, 556 (N.C. 2004); IMPACT Constr. Group, L.L.C. v. Superior
Concrete Constructors, Inc., 802 N.E.2d 901, 906-07 (Ind. 2004).
29. CARBONNEAU, supra note 14, at 245.
30. Korland, supra note 7, at 818.
31. AMERICAN ARBITRATION ASSOCIATION, 1999 AMERICAN ARBITRATION

10 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
of cases administered in the history of the AAA exceeded 2,000,000. 32
Because arbitration has become so widely accepted and used by
clients, it is important for the legal profession and the business
community to understand the arbitration process, its positives, and its
negatives.
III. OBJECTIVES OF ARBITRATION
United States Supreme Court Chief Justice Warren Burger provided
impetus to the Alternative Dispute Resolution (ADR) movement in 1984
at an American Bar Association meeting when he asserted that “[o]ur
[legal] system is too costly, too painful, too destructive, too inefficient for
a truly civilized people.” 33 A report by the U.S. House of
Representatives recognized that compared to litigation,
The advantages of arbitration are many: it is usually cheaper and
faster than litigation; it can have simpler procedural and
evidentiary rules; it normally minimizes hostility and is less
disruptive of ongoing and future business dealings among the
parties; it is often more flexible in regard to scheduling of times
and places of hearings and discovery devices. 34
The mantra of arbitration is: quick, efficient, economical, and fair
resolution of disputes. “Quick” because an arbitration hearing can be
scheduled for any convenient time including weekends and nights. 35
Ideally, the hearing is set and heard soon after the arbitrator has been
appointed. 36 “Efficient” because the Rules of Evidence and the Rules of
Civil Procedure which govern a trial are typically not applied. 37 The
ASSOCIATION ANN. REP. (1999), available at http://www.adr.org/si.asp?id =1540
(last visited Dec. 8, 2005).
32. American Arbitration Association, Fast Facts, at http://www.adr.org/FastFa
cts (last visited Oct. 25, 2005).
33. Warren E. Burger Former Chief Justice of the United States Supreme Court,
quoted in Mid-Year Meeting of American Bar Association, 52 U.S.L.W. 2471, 2471
(Feb. 28, 1984).
34. Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 280 (1995) (citing
H.R. REP. NO. 97-542, at 13 reprinted in 1982 U.S.C.C.A.N. 765, 777).
35. FRANK ELKOURI & EDNA A. ELKOURI, HOW ARBITRATION WORKS 307
(Alan Ruben ed., BNA Books 6th ed. 2003).
36. Id.
37. See American Arbitration Association, Commercial Arbitration Rules and
Mediation Procedures (Including Procedures for Large, Complex Commercial
Disputes) (Sept. 15, 2005), R-31, available at http://www.adr.org/sp.asp?id=22004

2006] ARBITRATION: THE BASICS 11
arbitrator and the parties can design any useful arbitral process which
works for them to deal with the conflict. 38 It is not uncommon for cases
to be arbitrated within a few months from the origin of the conflict, not
years. 39 “Economical” because the prevailing belief is that overall
arbitration costs are usually less than traditional litigation costs. 40
Arbitration, at least in theory, is “without the delays and exorbitant costs
of litigation.” 41 “Fair” because notice and a hearing by a neutral decision
maker, chosen by the parties, satisfies due process. 42 Arbitration
provides a fair process which results in a just decision. This “fairness”
concept is sometimes referred to as “industrial due process.” 43 It is a
process that the parties feel they are due in order to resolve their dispute
because the parties had a hand in shaping the arbitral clause, delineating
which of their disputes would be submitted to arbitration. It is a process
that demonstrates party autonomy in that the parties agree between and
(last visited Oct. 25, 2005) [hereinafter AAA Rules].
38. ELKOURI & ELKOURI, supra note 35, at 293-94.
39. Scott S. Morrison, Consider Binding Arbitration to Resolve Your Next
Dispute, 40-MAY RES GESTAE 18, 20 (May1997).
40. See American Arbitration Association, supra note 11, at 7.
41. Thomas J. Stipanowich, Rethinking American Arbitration, 63 IND. L.J. 425,
433-38 (1988). But see Frank E. Massengale & Karen Kaler Whitfield, Arbitration:
Be Careful What You Wish For, 44 LA. B.J. 120, 121 (Aug. 1996) (citing Advanced
Micro Devices, Inc. v. Intel Corp., 885 P.2d 994, 1012 (Cal. 1994) (confirming
arbitration award)). Advanced Micro Devices, Inc. represents an extreme example
in which arbitration was not the efficient procedure it is hailed to be. Id. In this
case, “counsel originally estimated that the entire arbitration process should take six
to eight weeks to complete; however, four and one-half years later, after 355 days of
hearings and 42,000 pages of transcript, the arbitrator entered an award.” Id.
42. Shafii v. British Airways, 872 F. Supp. 1178, 1181 (E.D.N.Y. 1995); see
also American Arbitration Association, Consumer Due Process Protocol, Principle
1, available at http://www.adr.org/sp.asp?id=22019 (last visited Oct. 25, 2005).
43. See Stroehmann Bakeries, Inc. v. Local 776, Int’l Brotherhood of
Teamsters, 969 F.2d 1436, 1445 (3d Cir. 1992) (holding that an employer did not
violate industrial due process when it discharged an employee accused of sexual
harassment, when the employer investigated the charges and when the employee
had a chance to respond to the charges, had notice that his conduct could result in
discharge, was informed of the source of the charge, and was informed that he was
entitled to representation); Teamsters, Local Union 657 v. Stanley Structures, Inc.,
735 F.2d 903, 906 (5th Cir. 1984) (holding that the employer “had notice of the
grievances against it and an opportunity to be heard. It thus received industrial due
process”); see also Sprewell v. Golden State Warriors, 266 F.3d 979, 990 (9th Cir.
2001) (holding that the arbitration award “demonstrates that the NBA’s
investigation ‘complied with industrial due process’ and that Sprewell received a
full and fair hearing”).

12 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
among themselves to follow it. The parties thus stipulate that, “[A]ll
disputes arising under a contract—whether statutory or contractual in
character—can be submitted to arbitration.” 44
IV. HOW ARBITRATION BEGINS
A. The Agreement to Arbitrate
Arbitration can be agreed to as a dispute resolution method predispute,
post-dispute, or mandated by a court after a lawsuit has been
filed. 45 With pre-dispute arbitration agreements, the parties agree to
arbitration in advance of any dispute; they set forth in the terms of their
contract a negotiated “arbitration clause.” 46 Pre-dispute arbitration
agreements are the typical means by which parties assent to submit their
44. CARBONNEAU, supra note 14, at 245.
45. The AAA provides recommended arbitration clause language for both predispute
and post-dispute situations:
Arbitration
The parties can provide for arbitration of future disputes by inserting the following
clause into their contracts (the language in the brackets suggests possible
alternatives or additions).
STD 1. Any controversy or claim arising out of or relating to this contract, or the
breach thereof, shall be settled by arbitration administered by the American
Arbitration Association in accordance with its Commercial [or other] Arbitration
Rules [including the Optional Rules for Emergency Measures of Protection], and
judgment on the award rendered by the arbitrator(s) may be entered in any court
having jurisdiction thereof.
Arbitration of existing disputes may be accomplished by use of the following.
STD 2. We, the undersigned parties, hereby agree to submit to arbitration
administered by the American Arbitration Association under its Commercial [or
other] Arbitration Rules the following controversy: [describe briefly]. We further
agree that a judgment of any court having jurisdiction may be entered upon the
award.
American Arbitration Association, Drafting Dispute Resolution Clauses: A
Practical Guide (July 1, 2004), available at http://www.adr.org/sp.asp?id=22020
(last visited Oct. 25, 2005) [hereinafter AAA, Drafting Dispute Resolution
Clauses]; see, e.g., MINN. R. GEN. PRAC. 114.01 (2005) (All civil cases are subject
to Alternative Dispute Resolution (ADR) processes, except for those actions
enumerated in MINN. STAT. § 484.76 and Rules 111.01 and 310.01 of these rules.).
46. See CARBONNEAU supra note 14, at 16 (“The arbitral clause . . . is a contract
under which the parties agree to submit future disputes to arbitration.”).

2006] ARBITRATION: THE BASICS 13
disputes to arbitration. In other circumstances, parties may agree to
arbitrate an existing controversy, i.e., after the conflict has arisen the
parties may then decide arbitration is the best way to handle the conflict
even though they had not agreed before the dispute to arbitrate the
matter. 47 But these post-dispute arbitration agreements are rare. 48 In
cases in which the parties agree to arbitrate after the dispute arises, the
parties should enter into a written “Submission to Arbitration
Agreement,” which is the equivalent of an arbitration clause setting forth
the parties agreement to arbitrate and the general guidelines to be
followed in the arbitration process. 49
There have been recent developments in the court systems that
permit a party, a party’s attorney, or the court on its own initiative, to
divert a case out of the court system into non-binding arbitration even
though neither party initially agreed to arbitration and even if one or both
of the parties do not want non-binding arbitration as a step. 50 “Court
mandated” or “court-annexed” arbitration has developed throughout the
United States as a way to relieve overcrowded court dockets. 51 At least
thirty-five States now have court mandated alternative dispute resolution
programs. 52 For example, Rule 114 of the Minnesota Rules of General
47. Some commentators suggest that certain types of disputes, like employment
disputes should only be submitted to arbitration after the dispute arises. See
Katherine Van Wezel Stone, Mandatory Arbitration of Individual Employment
Rights: The Yellow Dog Contract of the 1990s, 73 DENV. U. L. REV. 1017 (1996).
48. Ware, supra note 24, at 801 (“In some instances, the parties agree to
arbitrate a dispute that has already arisen. These post-dispute arbitration agreements
are rare and uncontroversial. More commonly, the agreement to arbitrate is formed
prior to any dispute.”)
49. NOLAN, supra note 3, at 6.
50. MINN. R. GEN. PRAC. 114.09 (2005). The Minnesota Rules of General
Practice allow a party “to opt for binding or non-binding arbitration.” Id.
According to the Rules, “the parties may construct or select a set of rules to govern
the process.” Id. If the parties choose non-binding arbitration conducted according
to the provisions set forth in Rule 114.09, the arbitrator’s award becomes final and
binding, if neither party files “a request for a trial within 20 days after the award is
filed.” Id.
51. Jane W. Adler et al., Simple Justice: How Litigants Fare in the Pittsburgh
Court Arbitration Program, in JOHN S. MURRAY ET AL., MEDIATION AND OTHER
NON-BINDING ADR PROCESSES 221 (Found. Press, Inc. 1996).
52. See, e.g., ARIZ. REV. STAT. § 12-133 (2004) (requiring “arbitration in all
cases which are filed in superior court in which the court finds or the parties agree
that the amount in controversy does not exceed the jurisdictional limit”); CAL. CIV.
PROC. CODE § 1141.11 (2004); MINN. R. GEN. PRAC. 114.01 (2005); D. MINN.
LOCAL CT. R. 16.5(b)(1) (2004); M.D. FLA. LOCAL CT. R. 8.02(a) (2004); N.D.

14 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
Practice allows civil cases to be referred to some form of ADR solely on
the initiative of the judge or only one of the attorneys representing a
party. 53 If the case is referred to arbitration, the decision is non-binding
and either party may reject the award and demand a trial. If after ten
days neither party rejects the award of the arbitrator and demands a trial,
the decision becomes binding. So, a “non-binding arbitration” can
become “binding” if both parties accept the outcome or both wait too
long to demand that the case be returned to court. 54
B. The Arbitration Clause
Arbitration is commonly known as a creature of contract. 55 In a
free-market, free-trade economy, the parties to an arbitration agreement
have wide latitude in drafting their arbitration clause. Because the
arbitration clause affects how the entire arbitration process will proceed,
careful drafting is required. The treatment given an arbitration clause
resembles that of any free-market contract. 56
Parties to a contract make their own law, and it is, of course, true
that, subject to the rules of public policy and public order, the
parties are free to agree upon such terms as they may choose.
Nevertheless, agreements that are intended to have legal
operation . . . create legal rights and duties, and legal rights and
CAL. LOCAL CT. R. 4-2 (2005).
53. MINN. R. GEN. PRAC. 114.01 (2005) (“All civil cases are subject to
Alternative Dispute Resolution (ADR) processes, except for those actions
enumerated in Minn. Stat. § 484.76 and Rules 111.01 and 310.01 of these rules.”).
54. See, e.g., MINN. R. GEN. PRAC. 114.09(e) (2005) (stating that “[i]f no party
has filed a request for a trial within 20 days after the award is filed, the court
administrator shall enter the decision as a judgment . . . [which shall] have the same
force and effect as . . . a judgment in a civil action or proceeding.”).
55. See Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489
U.S. 468, 472 (1989) (quoting Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213,
219 (1985) (“[B]ecause ‘the thrust of the federal law is that arbitration is strictly a
matter of contract,’ the parties to an arbitration agreement should be ‘at liberty to
choose the terms under which they will arbitrate.’”)).
56. See Doctor’s Assocs. v. Casarotto, 517 U.S. 681, 687 (1996) (quoting
Scherk v. Alberto-Culver Co., 417 U.S. 506, 511 (1974) (“By enacting § 2, . . .
Congress precluded States from singling out arbitration provisions for suspect
status, requiring instead that such provisions be placed ‘upon the same footing as
other contracts.’”)); St. John’s Sanitary Dist. v. Town of Schereville, 621 N.E.2d
1160, 1162 (Ind. Ct. App. 1993) (recognizing that when interpreting an arbitration
clause, “the court will apply ordinary contract principles”); see also Ziegler v.
Whale Secs. Co., 786 F. Supp. 739, 741 (N.D. Ind. 1992).

2006] ARBITRATION: THE BASICS 15
duties cannot exist in a vacuum, but must have a place within a
legal system. 57
While contracts generally do not have to be in writing to be
enforceable, arbitration clauses must be in writing to be valid. 58 Because
both parties give up their right to go to court, the Federal Arbitration Act
requires that an arbitration clause be in writing. 59 An agreement to
arbitrate must be “openly and freely” entered into by both parties. 60
Parties will not be compelled to arbitrate if they have not voluntarily
contracted to use this mechanism to resolve their disputes. 61 Once the
court has determined that the arbitration agreement is valid and that the
parties contracted for arbitration of their dispute, they will be held to it. 62
57. Angela L. Kimbrough, Arbitration: Demise of the Right to Trial by Jury, in
1 AM. TRIAL LAW. ASS’N ANNUAL CONVENTION REFERENCE MATERIALS 397
(2000) (quoting Lord McNair, The General Principals of Law Recognized by
Civilized Nations, 33 BRIT. Y.B. INT’L L. 1, 7 (1957)).
58. 9 U.S.C. § 2 (2000) (providing that “[a] written provision in any maritime
transaction or a contract evidencing a transaction involving commerce to settle by
arbitration a controversy thereafter arising out of such contract or transaction, . . . or
an agreement in writing to submit to arbitration an existing controversy arising out
of such a contract, transaction, or refusal, shall be valid, irrevocable, and
enforceable”) (emphasis added).
59. Id.; see Kilmer v. Flocar, Inc., 212 F.R.D. 66, 72 (N.D.N.Y. 2002) (citing In
re Arbitration Between Chung & President Enters. Corp., 943 F.2d 225, 229 (2d
Cir. 1991) (noting that, “[g]enerally, the FAA governs all questions before a federal
court regarding the validity and enforceability of arbitration agreements if: (1) the
parties have entered into a written arbitration agreement”)). The Kilmer court held
that, because agreement was not in writing, it did not meet requirements of the
FAA. Id.
60. Benyon v. Garden Grove Med. Group, 161 Cal. Rptr. 146, 149 (Cal. Ct.
App. 1980) (“[I]n order to be enforceable an agreement to arbitrate must have been
openly and fairly entered into by the parties.”); see also United Steel Workers of
Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (1960) (“[A]rbitration is
a matter of contract and a party cannot be required to submit to arbitration any
dispute which he has not agreed so to submit.”).
61. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614,
626 (1985); Litton Fin. Printing Div. v. NLRB, 501 U.S. 190, 199 (1991) (quoting
Hilton-Davis Chem. Co. v. Local 342, Int’l Chem. Workers Union, 185 N.L.R.B.
241, 242 (1970) (“[T]he commitment to arbitrate is a ‘voluntary surrender of the
right of final decision which Congress . . . reserved to [the] parties.’”)).
62. Hahnemann Univ. v. Dist. 1199C, Nat. Union of Hosp. & Health Care
Employees, 765 F.2d 38, 41 (3d Cir. 1985) (quoting Warrior & Gulf Navigation
Co., 363 U.S. at 582-83) (“A court should order the reluctant party to submit the
dispute to arbitration ‘unless it may be said with positive assurance that an
arbitration clause is not susceptible of an interpretation that covers the asserted

16 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
The FAA then requires a court to “stay litigation” 63 and “compel
arbitration.” 64
The language of the arbitration clause is vital because it is what
courts examine to determine whether parties have submitted a particular
dispute to arbitration. Arbitration clauses run the gamut from the simple
to the complex to the ridiculous. A simple, standard arbitration clause is
often recommended for any type of dispute. For example, the American
Arbitration Association (AAA) recommends this simple clause for all
commercial contracts:
Any controversy or claim arising out of or relating to this contract,
or the breach thereof, shall be settled by arbitration administered
by the American Arbitration Association in accordance with its
Commercial [or other] Arbitration Rules [including the Optional
Rules for Emergency Measures of Protection], and judgment on
the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction thereof. 65
A similar simple clause is recommended even for large international
disputes by agencies such as the London Court of International
Arbitration (LCIA), 66 the International Chamber of Commerce (ICC) 67
dispute.’”).
63. 9 U.S.C. § 3 (2000) (providing that “[i]f any suit . . . be brought in any of
the courts of the United States upon any issue referable to arbitration under an
agreement in writing for such arbitration, the court in which such suit is pending,
upon being satisfied that the issue involved in such suit or proceeding is referable to
arbitration under such an agreement, shall on application of one of the parties stay
the trial of the action until such arbitration has been had in accordance with the
terms of the agreement”).
64. 9 U.S.C. § 4 (providing that “[a] party aggrieved by the alleged failure,
neglect, or refusal of another to arbitrate under a written agreement for arbitration
may petition any United States district court . . . for an order directing that such
arbitration proceed in the manner provided for in such agreement. [U]pon being
satisfied that the making of the agreement for arbitration . . . is not in issue, the
court shall make an order directing the parties to proceed to arbitration in
accordance with the terms of the agreement”).
65. See sources cited supra note 45.
66. London Court of International Arbitration, Arbitration Rules: Recommended
Clauses (Jan. 1, 1998), available at http://www.lcia.org/ (last visited Oct. 25, 2005).
Any dispute arising out of or in connection with this contract, including any
question regarding its existence, validity or termination, shall be referred to and
finally resolved by arbitration under the LCIA Rules, which Rules are deemed to be
incorporated by reference into this clause. The number of arbitrators shall be
[one/three].

2006] ARBITRATION: THE BASICS 17
and the China International Economic and Trade Arbitration
Commission (CIETAC). 68
Parties who want to retain more control over the arbitration
proceeding should include more detail in the arbitration clause. A more
detailed arbitration clause will address: the method of selection and
number of arbitrators; arbitrator qualifications; language used in the
arbitration; governing law to be applied during the arbitration; conditions
precedent to arbitration; preliminary relief; document discovery; duration
of arbitration proceedings; remedies; reasoned opinion accompanying
the award; assessment of attorneys fees; confidentiality; and appeal. 69
Id.
The seat, or legal place, of arbitration shall be [City and/or Country].
The language to be used in the arbitral proceedings shall be [ ].
The governing law of the contract shall be the substantive law of [ ].
67. International Chamber of Commerce, The Standard ICC Arbitration Clause:
Drafting the Arbitration Agreement, available at http://www.iccwbo.org/court/engli
sh/arbitration/model_clause.asp (last visited Oct. 25, 2005). The ICC recommends
parties to include the following clause in their contracts:
All disputes arising out of or in connection with the present contract shall be finally
settled under the Rules of Arbitration of the International Chamber of Commerce
by one or more arbitrators appointed in accordance with the said Rules.
Id.
68. China International Economic and Trade Arbitration Commission, Model
Arbitration Clause, available at http://www.cietac.org.cn/english/model_clause/mo
del_clause.htm (last visited Oct. 25, 2005). CIETAC recommends the following
clause:
Any dispute arising from or in connection with this Contract shall be submitted to
China International Economic and Trade Arbitration Commission for arbitration
which shall be conducted in accordance with the Commission’s arbitration rules in
effect at the time of applying for arbitration. The arbitral award is final and binding
on both parties.
Id.
69. See, e.g., Scherk v. Alberto-Culver Co., 417 U.S. 506, 508 (1974). In the
Scherk case, the arbitration clause provided that:
The parties agree that if any controversy or claim shall arise out of this agreement
or the breach thereof and either party shall request that the matter shall be settled by
arbitration, the matter shall be settled exclusively by arbitration in accordance with
the rules then obtaining of the International Chamber of Commerce, Paris, France,
by a single arbitrator, if the parties shall agree upon one, or by one arbitrator
appointed by each party and a third arbitrator appointed by the other arbitrators. In

18 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
But arbitration clauses can become “pathological” 70 when the clause
is designed to give one side a disproportionate advantage. In one
notorious case, the employer drafted the arbitration clause so one-sided
that the court refused to uphold the agreement to arbitrate. 71 The Hooters
restaurant chain used the following clause in its employment contract:
Hooters and the employee agree to arbitrate all employment
related disputes and controversies. Each agrees to arbitrate all
disputes arising out of employment including any claim of
discrimination, sexual harassment, retaliation or wrongful
discharge whether arising under federal or state law. The
employee and the company agree to resolve any claims pursuant
to the company’s rules and procedures for alternative resolution of
employment related disputes, as promulgated by the company
from time to time. 72
The Hooters court stated that the provisions “when taken as a
whole, however, are so one-sided that their only possible purpose is to
undermine the neutrality of the proceeding.” 73 By entering into an
case of any failure of a party to make an appointment referred to above within four
weeks after notice of the controversy, such appointment shall be made by said
Chamber. All arbitration proceedings shall be held in Paris, France, and each party
agrees to comply in all respects with any award made in any such proceeding and
to the entry of a judgment in any jurisdiction upon any award rendered in such
proceeding. The laws of the State of Illinois, U.S.A. shall apply to and govern this
agreement, its interpretation and performance.
Id.
70. For an analysis of flawed arbitration clauses, see Benjamin G. Davis,
Pathological Clauses: Frédéric Eisman’s Still Vital Criteria, 7 ARB. INT’L 4 (1991).
71. Hooters of Am. v. Phillips, 173 F.3d 933 (4th Cir. 1999).
72. Id. at 936.
73. Id. at 938. In this case, the arbitration rules were procedurally biased in
favor of Hooters. Id. Employees were required to provide Hooters with notice of
their claims from the outset while Hooters was not required to provide responsive
pleadings or notice of any defenses. Id. Hooters also had complete control over the
arbitration panel. Id. at 938-39. Under the rules, the panel of three arbitrators
would be selected from a list of eligible arbitrators compiled by Hooters. Id. The
rules would have permitted Hooters to choose arbitrators who have existing
financial or familial interests in the restaurant and was free to remove from the list
arbitrators who rule against it. Id. at 939. Hooters was also allowed to expand the
proceeding to include any matter whatsoever that it wished; however, the employee
could not raise any issue which was not included in the Notice of Claim. Id. The
rules granted Hooters numerous rights that it denied to the employee: the right to
move for summary judgment, the right to bring a motion to vacate the arbitral award
in court if the arbitrator exceeded his/her authority, to cancel the arbitration

2006] ARBITRATION: THE BASICS 19
arbitration agreement, the parties agreed to submit their dispute to
arbitration—a process in which their disputes should be decided fairly by
a neutral third party. 74 By promulgating such one-sided arbitration rules,
Hooters breached the sense of fundamental fairness in its agreement to
arbitrate. 75 The American Arbitration Association has issued a “Due
Process Protocol” refusing to administer such disputes with these types
of “unfair” arbitration clauses. 76
V. INITIATING THE ARBITRATION
Most arbitration agencies simplify the process by handling most of
the preliminary matters. For example, the American Arbitration
Association will notify the other party of the initiation of the arbitration
proceeding, 77 will assign an arbitrator if the parties cannot agree, 78 will
notify the arbitrator that the arbitrator has been chosen, 79 and will assist
in arranging a time and place for the parties to meet. 80 Simplicity and
ease of use of the process are two of the reasons arbitration is used. 81
But a party can forfeit the right to arbitration if the party fails to take
affirmative steps to initiate arbitration. 82
agreement upon thirty days notice. Id. Perhaps most egregiously, Hooters could
change the rules without notice at any time, even during the arbitration proceeding.
Id.
74. Id. at 940.
75. Id.
76. American Arbitration Association, supra note 42, at Principle 1.
77. AAA Rules, supra note 37, R-4.
78. Id. R-11.
79. Id. R-2
80. Id. R-9, R-10, R-22.
81. JULIAN D. M. LEW, LOUKAS MISTELIS & STEFAN M. KRÖLL, COMPARATIVE
INTERNATIONAL COMMERCIAL ARBITRATION 36-41 (Kluwer Law Int’l 2003).
82. See, e.g., CAL. BUS. & PROF. CODE § 6201(a) (2004) (stating that, in
disputes involving attorney fees, “the client’s failure to request arbitration within 30
days after receipt of notice from the attorney shall be deemed a waiver of the
client’s right to arbitration under the provisions of this article”); ME. REV. STAT.
ANN. tit. 23, § 52-A (2004) (In contract disputes between a contractor and a
subcontractor, “failure to submit [the claim] to arbitration as provided under this
subsection shall constitute a waiver of the claim”); see also Engalla v. Permanente
Med. Group, Inc., 938 P.2d 903, 909 (Cal. 1997). In Engalla, the defendant, Kaiser,
administered its own arbitration program. Id. The arbitration agreement provided
for three arbitrators and each party was to select one arbitrator of its own choosing
within thirty days of initial service on the respondent. Id. Within an additional
thirty days, the two party-appointed arbitrators were to jointly select a neutral

20 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
A. Arbitration Agency or Ad Hoc Proceeding
When a “claimant” and a “respondent” agree to arbitrate predispute,
post-dispute, or are mandated to participate in a non-binding
arbitration by a court, they must make an important decision whether to
utilize an arbitration agency or whether to rely on their own “ad hoc”
arbitration proceeding. If the parties wish to utilize an agency, such as
the AAA or the International Chamber of Commerce (ICC), they should
so specify in their agreement. 83 By utilizing an agency, the parties
consent to conduct the arbitration according to the rules of that agency. 84
arbitrator. Id. Engalla sought to bring a malpractice action against Kaiser for
failure to diagnose his lung cancer in a timely manner. Id. His attorney requested
expedited procedures numerous times, because plaintiff was terminally ill. Id. at
910. Despite these requests, defendant continued to delay in choosing an arbitrator
and arranging for discovery. Id. at 910-11. By the time the neutral arbitrator was
chosen, 144 days had passed since the initial service on respondent. Id. at 912.
Plaintiff died one day later. Id. As a result, his wife’s claim for loss of consortium
merged with the medical malpractice claim. Id. at 914. Maximum damages that
could be awarded were reduced from $500,000 to $250,000. Id. The Supreme
Court of California found that there was substantial evidence indicating that the
defendant had waived its right to arbitration through delay and remanded the issue
to the trial court. Id. at 924.
83. The following are some of the most well-known and widely used arbitration
agencies in the world: the AAA (http://www.adr.org) deals with a wide range of
international and domestic disputes, including construction, automotive, insurance
claims, internet commerce, consumer finance, labor, and mass claims; the ICC
(http://www.iccwbo.org) specializes in the resolution of international business
disputes; the London Court of International Arbitration (http://www.lciaarbitration.com)
works to resolve international and domestic commercial disputes;
the Arbitration Institute of the Stockholm Chamber of Commerce
(http://www.sccinstitute.com) is one of the leading international arbitration
institutes in the world; the China International Economic and Trade Arbitration
Commission (CIETAC) (http://www.cietac.org.cn) handles disputes arising from
contractual or non-contractual, economic and trade transactions; the National
Arbitration Forum (NAF) (http://www.arb-forum.com) handles national and
international disputes involving commercial or individual claims; and the Federal
Mediation and Conciliation Service (FMCS) (http://www.fmcs.gov) deals
specifically with labor disputes in the United States.
84. Each agency provides rules to be used in the arbitration proceeding. Often
the rules vary depending on the specific dispute. See American Arbitration
Association, Rules and Procedures, at http://www.adr.org/RulesProcedures (last
visited Oct. 25, 2005) (listing the various rules and procedures for different
disputes). The AAA has particular rules regulating arbitration of accident claims,
commercial disputes, labor disputes, international disputes, etc. Id. Agency rules
also vary according to the agency utilized. Compare American Arbitration
Association, International Dispute Resolution Procedures, available at

2006] ARBITRATION: THE BASICS 21
In an “ad hoc” arbitration proceeding, no agency is selected and, thus,
the parties set the rules and begin the process on their own. Before
deciding whether to contract for “agency” arbitration or to proceed “ad
hoc,” clients and their counsel should consider both the advantages and
disadvantages of each.
Administering arbitral institutions, like the AAA, the United States
Federal Mediation and Conciliation Service, and the ICC, offer distinct
advantages over ad hoc arbitration. They are easy to access, have time
tested rules, maintain lists of qualified and experienced arbitrators, and
have qualified staff to assist and to answer procedural questions. 85 Their
rules and procedures are likely to produce consistent and predictable
results—and their notable experience more easily allows them to deal
with unusual circumstances. 86 Arbitration agencies contribute
organization and control to the proceedings by providing administrative
assistance to the parties, including maintaining files, investigating
conflicts of interest, collecting fees, scheduling, and providing a site to
hold the arbitration. 87 It is widely perceived that an institutional award
will have greater cache, courts are likely to respect such institutions, and
courts are more likely to give deference to the award of the arbitrator. 88
One key disadvantage to using an agency is the costs and fees
prescribed by the particular administering institution. For example, the
AAA bases its filing fees on the amount in controversy in commercial
arbitration cases. 89 Thus, a party bringing a claim of $160,000 is
http://www.adr.org/sp.asp?id=22090 (last visited Oct. 25, 2005) (allowing parties to
choose their own method for appointing a panel of arbitrators), with International
Chamber of Commerce, Rules of Arbitration, R-15 (Jan. 1, 1998), available at
http://www.iccwbo.org/court/english/arbitration/rules.asp (last visited Oct. 26,
2005) (providing that each party shall choose an arbitrator with the third arbitrator
appointed by the agency) [hereinafter ICC Rules].
85. James K. Hoenig, The Pros and Cons of Administered Arbitration, 49 DISP.
RESOL. J. 59, 60-61 (June 1994).
86. Matthew Rasmussen, Overextending Immunity: Arbitral Institution Liability
in the United States, England, and France, 26 FORDHAM INT’L L.J. 1824, 1833
(June 2003).
87. Robert L. Ebe, The Nuts and Bolts of Arbitration, 22-FALL FRANCHISE L.J.
85, 85 (Fall 2002).
88. See LEW ET AL., supra note 81, at 36.
89. American Arbitration Association, Resolving Commercial Financial
Disputes: A Practical Guide (Sept. 15, 2005), available at http://www.adr.org/sp.as
p?id=22008 (last visited Dec. 8, 2005).
The AAA Guide requires Administrative Fees for Commercial Arbitration
according to the following schedule:

22 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
required to pay a $2,750 “filing fee” plus $1,250 for a “case service fee”
to initiate arbitration proceedings. 90 Also, utilizing an agency can add to
the time it takes to arrange the arbitration because there is an additional
level of communication required between the administrator, the
attorneys, the parties, and the arbitrator(s). 91
Ad hoc arbitration does not rely on an agency, nor its good offices,
nor its established rules and procedures. 92 Ad hoc arbitration allows the
Amount of Claim Initial Filing Fee Case Service Fee
Above $0 to $10,000 $500 $200
Above $10,000 to $75,000 $750 $300
Above $75,000 to $150,000 $1,500 $750
Above $150,000 to $300,000 $2,750 $1,250
Above $300,000 to $500,000 $4,250 $1,750
Above $500,000 to $1,000,000 $6,000 $2,500
Above $1,000,000 to $5,000,000 $8,000 $3,250
Above $5,000,000 to $10,000,000 $10,000 $4,000
Above $10,000,000 * *
Nonmonetary Claims ** $3,250 $1,250
*Contact your local AAA office for fees for claims in excess of $10 million.
**This fee is applicable when a claim or counterclaim is not for a monetary amount.
Where a monetary claim is not known, parties will be required to state a range of
claims or be subject to the highest possible filing fee.
Id.
In addition, Rule 48 of the Arbitration Rules for Commercial Financial
Disputes states:
Members of the National Roster appointed as arbitrators will be compensated based
on the amount of service involved and the number of hearings. Arbitrators shall
charge a rate consistent with the arbitrator’s stated rate of compensation, beginning
with the first day of hearing. If the parties fail to agree to the terms of
compensation, an appropriate rate shall be established with the arbitrator by the
AAA and communicated in writing to the parties.
Any arrangement for the compensation of an arbitrator shall be made through the
AAA and not directly between the parties and the arbitrator.
American Arbitration Association, Arbitration Rules for Commercial Financial
Disputes, R-48, available at http://www.adr.org/sp.asp?id=22008#ArbRules (last
visited Dec. 5, 2005).
90. AAA Practical Guide, supra note 89.
91. Ebe, supra note 87, at 85-86.
92. Joyce J. George, The Advantages of Administered Arbitration When Going
It Alone Just Won’t Do, 57 DISP. RESOL. J. 66, 68-69 (Aug.-Oct. 2002). George
suggests that the following questions are left to the parties to answer in ad hoc

2006] ARBITRATION: THE BASICS 23
parties to make fundamental decisions relating to the arbitration
proceeding. 93 They can write their own rules, decide their own time
schedule, and make the proceeding as flexible or inflexible as they
choose. Ad hoc arbitration is more informal and more flexible than
institutional arbitration. 94 The flexibility of ad hoc arbitration is a
benefit; the parties do not have to deal with the bureaucracy of an
agency. 95 Flexibility allows parties and their lawyers to use whatever
arbitration rules and procedures they desire. 96 With ad hoc arbitration,
there are no administrative fees. 97 It can be quicker and cheaper when
the parties and their lawyers are in procedural agreement on the process.
But there is a two-edged sword to ad hoc arbitration. The parties are
responsible for all administrative aspects of the arbitration. The parties
must mutually agree on the arbitrators they will use in the proceeding. 98
If one party refuses to agree to an arbitrator, the proceeding cannot begin.
Once a serious dispute has arisen between the parties, the cooperation
needed to coordinate an arbitration can be unrealistic. 99 Because the
rules and procedures are not set, if the parties cannot agree on how to
proceed, they may find themselves in court—something they both had
hoped to avoid by agreeing to arbitrate—just to litigate issues on how the
arbitration:
What is the nature of the dispute to be arbitrated? What is the scope of the
arbitrators’ jurisdiction? How are notices to be given and when is an answer to be
made? What selection process is to be used to name the arbitrators? What if a party
fails to select an arbitrator? Should a default procedure be provided? If so, what
procedure and how is agreement to be obtained between the parties? How can an
arbitrator be removed or disqualified? Where is the arbitration to be held? What is
the applicable law? What, if any, rules are to apply to the arbitration? What
discovery procedures will be permitted? Can the arbitrator award any provisional
remedies? What type of award is required? Is there any method for modifying an
award once made? Is the arbitration to be binding? How and when is the arbitrator
to be paid? Who pays the costs of the hearing facility?
Id.
93. See id. at 68.
94. Rasmussen, supra note 86, at 1833.
95. Ebe, supra note 87, at 86.
96. Tom Arnold, Delay and Cost Booby Traps in Arbitration Practice and How
to Avoid Them, CA13 A.L.I.-A.B.A. 99, 104 (American Law Institute—American
Bar Association Continuing Legal Education, Course of Study, Jan. 25, 1996).
97. Rasmussen, supra note 86, at 1833.
98. See George, supra note 92, at 68.
99. Thomas E. Carbonneau, International Commercial Arbitration: The
Exercise of Contract Freedom in the Making of Arbitration Agreements, 36 VAND.
J. TRANSNAT’L L. 1189, 1207 (2003).

24 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
arbitration will be conducted. 100 The key problem with ad hoc
arbitration is it lacks institutional oversight. Despite having a clear
arbitration clause in the contract, if one side is recalcitrant and refuses to
pick an arbitrator, it is difficult to force the party into the ad hoc
arbitration. Furthermore, the parties lack the power that an arbitrator has
to move the proceeding along. 101 For these reasons, and unless both
parties and their attorneys have considerable experience with arbitration,
it is best to utilize the services of an agency. 102 As mentioned previously,
some of the well known arbitration providers are the American
Arbitration Association (AAA), 103 the International Chamber of
Commerce (ICC), 104 and the United States Federal Mediation and
Conciliation Service (FMCS). 105 Many state agencies also provide
100. See Arnold, supra note 96, at 108. In an ad hoc proceeding if “one party is
recalcitrant and wants to obstruct the arbitration . . . the party desiring the arbitration
must go to court to compel initiation of the arbitration.” Id. See also Hoenig, supra
note 85, at 60. Any “dispute among the parties as to the appropriate venue for the
arbitration would delay appointment of an arbitrator and most likely require a trip to
court.” Id. at 62. If the parties cannot agree on an arbitrator or did not specify a
method to decide on an arbitrator, “the usual result is that the court will appoint an
arbitrator.” Id. at 60.
101. Rasmussen, supra note 86, at 1834; see, e.g., American Arbitration
Association, The Code of Ethics for Arbitrators in Commercial Disputes, Canon
1(F) (March 1, 2004), http://www.adr.org/sp.asp?id=21958 (last visited Dec. 5,
2005) [hereinafter AAA Code of Ethics]. The AAA Code of Ethics provides that
“[a]n arbitrator should conduct the arbitration process so as to advance the fair and
efficient resolution of the matters submitted for decision. An arbitrator should make
all reasonable efforts to prevent delaying tactics, harassment of parties or other
participants, or other abuse or disruption of the arbitration process.” Id.
102. Carbonneau, supra note 99, at 1207.
103. See American Arbitration Association, A Brief Overview of the American
Arbitration Association, at http://www.adr.org/Overview (last visited Dec. 5, 2005).
In 2002, the AAA administered 230,255 cases, which were resolved through
mediation, arbitration, or less formal methods of dispute resolution. Id.
104. See International Chamber of Commerce, Facts and Figures on ICC
Arbitration in 2003, at http://www.iccwbo.org/court/english/right_topics/stat_2003.
asp (last visited Dec. 5, 2005). Five-hundred eighty requests for arbitration were
filed with the International Court of Arbitration. Id. Of these requests, the ICC
rendered awards in 369 cases. Id.
105. See Federal Mediation and Conciliation Service, Arbitration Statistics
Fiscal Year 2004, at http://fmcs.gov/assets/files/Arbitration/CLOSEDCASESFOR0
4.doc (last visited Dec. 5, 2005). In 2004, the number of panel requests received by
the FMCS exceeded 18,000. Id. In the same year, the agency closed 2,485 of those
requests. Id. This number is remarkable compared to the 260 cases that were
closed by the agency only two years prior. Id.

2006] ARBITRATION: THE BASICS 25
arbitration services. 106
106. State of Minnesota Bureau of Mediation Services, About the Bureau of
Mediation Services, at http://www.bms.state.mn.us (last visited Oct. 26, 2005). The
State of Minnesota passed the Minnesota Labor Relations Act (MLRA) in 1939 to
facilitate the settlement of labor-related disputes. Id. As part of the MLRA, the
BMS was created to perform functions, including arbitration and mediation. Id.
Many other state and local agencies exist for the application of ADR services
including the following (links to these organizations are available on the website of
the Association of Labor Relations Agencies (ALRA), at http://www.alra.org/lablin
ks.htm (last visited Oct. 19, 2005)):
Alaska Labor Relations Agency
Arkansas Department of Labor, Mediation and Conciliation Division
California Agricultural Labor Relations Board
California Public Employment Relations Board
California State Mediation and Conciliation Service
Connecticut State Board of Labor Relations
Connecticut State Board of Mediation & Arbitration
Delaware Public Employment Relations Board
District of Columbia Public Employee Relations Board
Florida Employees Relations Commission
Hawaii Labor Relations Board
Illinois Educational Labor Relations Board
Illinois Labor Relations Board
Indiana Education Employment Relations Board
Los Angeles City Employee Relations Board
Los Angeles County Employee Relations Commission
Maine Labor Relations Board
Maryland Higher Education Labor Relations Board
Massachusetts Board of Conciliation and Arbitration
Massachusetts Joint Labor-Management Committee for Municipal Police and Fire
Michigan Department of Civil Service
Michigan Employment Relations Commission
Minnesota Bureau of Mediation Services
Missouri State Board of Mediation
Montana Board of Personnel Appeals
Montana Labor Standards Bureau, Collective Bargaining Unit
Nebraska Commission of Industrial Relations
Nevada Local Government Employee-Management Relations Board
New Hampshire Public Employee Labor Relations Board
New Jersey Public Employment Relations Commission
New Mexico Public Employee Labor Relations Board
New York City Office of Collective Bargaining
New York State Employment Relations Board
New York State Public Employment Relations Board
North Carolina Employment Mediation Bureau
Ohio State Employment Relations Board
Oklahoma Public Employees Relations Board
Oregon Employment Relations Board
Pennsylvania Bureau of Mediation
Pennsylvania Labor Relations Board

26 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
The AAA, one of the largest private arbitration agencies in the
United States, is frequently used for administering the arbitration
process, providing rules, lists of arbitrators, and facilities for
arbitration. 107 The AAA resolves domestic, international, labor,
insurance and many other types of disputes, 108 utilizing a variety of
alternative dispute mechanisms, such as arbitration, mediation, elections,
and other out-of-court settlement procedures. 109 The AAA provides
education and training for neutrals and arbitrators and works to design
ADR systems for corporations, unions, government agencies, law firms
and the courts. 110 The AAA has thirty-four offices nationwide and two
international offices in New York and Dublin. 111
Less well-known, but growing in recognition, are domestic agencies
like JAMS, The Dispute Resolution Experts 112 and the National
Arbitration Forum (NAF). 113 The decision as to which institution is best
suited for a particular set of parties and their potential disputes requires
due diligence to best represent the client.
Phoenix Employment Relations Board
Rhode Island State Labor Relations Board
Vermont Labor Relations Board
Virgin Islands Department of Labor
Washington State Public Employment Relations Commission
West Virginia Division of Labor
Wisconsin Employment Relations Commission
107. Jacob P. Hart & David W. Wolf, Grievance Arbitration—Some Hints on
Arbitrator Selection, Preparation, and Trial, R176 A.L.I.-A.B.A. 1401, 1416
(American Law Institute—American Bar Association Continuing Legal Education,
Labor & Employment Law, 6th ed. 1992).
108. The AAA offers expertise in the following areas: Claims Programs,
Commercial, Construction, Consumer, Domain Name Disputes, Elections,
eCommerce, Employment, Energy, Fact Finding, Federal, Health Care, Insurance,
International, Labor, Large Complex Cases, Mediation, Reinsurance, Safe Harbor,
Securities, Sports-Olympic. American Arbitration Association, Focus Areas, at
http://www.adr.org/Focusareas (last visited Nov. 6, 2005).
109. American Arbitration Association, supra note 103.
110. Id.
111. Id.
112. JAMS is a large private ADR service provider primarily based in California,
but growing nationally at an exponential rate. The word JAMS is no longer an
acronym. JAMS, The Dispute Resolution Experts, at http://www.jamsadr.com/ (last
visited Oct. 19, 2005).
113. Originally founded in 1986 to handle court-ordered ADR settlement of
disputes, the National Arbitration Forum is now available to handle private disputes
as well. National Arbitration Forum, at http://www.arb-forum.com/ (last visited
Nov. 6, 2005).

2006] ARBITRATION: THE BASICS 27
The Federal Mediation and Conciliation Service (FMCS) is another
provider of arbitration services in the United States. The FMCS is as an
independent agency of the United States government. 114 Its mission is to
promote labor-management peace and cooperation. 115 It provides
services to both the public and private sectors. 116 The FMCS has its
headquarters in Washington, D.C. and has two regional offices and more
than seventy field offices throughout the United States. 117
There are also many state agencies that provide arbitration services.
For example, the State of Minnesota Bureau of Mediation Services
provides alternative dispute resolution mechanisms, including
conciliation, mediation, and arbitration, in an attempt to facilitate a
constructive labor-management environment. 118
The ICC is a world-wide business organization. 119 Its activities
cover a broad spectrum from arbitration and dispute resolution to
fighting corruption and combating commercial crime. 120 The ICC’s
dispute resolution mechanisms are designed specifically to resolve
business disputes of an international character. 121 The ICC International
114. See 29 U.S.C. §§ 141, 171-173 (2004). The FMCS was created as part of
the Labor Management Relations Act, 1947 to “prevent or minimize interruptions of
the free flow of commerce growing out of labor disputes [and] to assist parties to
labor disputes in industries affecting commerce to settle such disputes through
conciliation and mediation.” 19 U.S.C. § 173. Section 171 provides that “[i]t is the
policy of the United States—that sound and stable industrial peace and the
advancement of the general welfare, health, and safety of the Nation and of the best
interests of employers and employees can most satisfactorily be secured by the
settlement of issues between employers and employees through the processes of
conference and collective bargaining,” which “may be advanced by making
available full and adequate governmental facilities for conciliation, mediation, and
voluntary arbitration.” Id.
115. Federal Mediation and Conciliation Serv., Who We Are, at http://www.fmcs.
gov/internet/categoryList.asp?categoryID=13 (last visited Dec. 5, 2005).
116. Id.
117. Id.
118. State of Minnesota Bureau of Mediation Services, supra note 106.
119. International Chamber of Commerce, What is ICC, at http://www.iccwbo.or
g/home/menu_what_is_icc.asp (last visited Oct. 26, 2005). The ICC aims “to serve
world business by promoting trade and investment, open markets for goods and
services, and the free flow of capital.” Id.
120. Id.
121. International Chamber of Commerce, Introduction to Arbitration, at
http://www.iccwbo.org/court/english/arbitration/introduction.asp (last visited Nov.
6, 2005). In an international setting, arbitration has an added benefit. Id. More
than 130 nations are signatories of the 1958 United Nations Convention on the
Recognition and Enforcement of Foreign Arbitral Awards (commonly known as the

28 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
Court of Arbitration [in fact, a private, non-governmental organization],
established in 1923, is the arbitration body of the ICC and ensures the
application of the ICC’s rules. 122 The ICC’s headquarters are in Paris
and it currently has national committees operating in eighty-four
countries throughout the world. 123
Parties in international commercial investment disputes can also
utilize the International Centre for Settlement of Investment Disputes
(ICSID). ICSID is an outgrowth of the World Bank and operates as an
autonomous organization with services that may be invoked by
agreement of the parties who are members of contracting nations under
the Convention on the Settlement of Investment Disputes between States
and Nationals of Other States. 124
B. Notifying the Arbitration Agency of Request for Arbitration
If the parties choose to use an arbitration agency to facilitate
resolution of their dispute, the first step is to notify the agency that the
claimant wants the arbitration to begin. The claimant should send (1) a
New York Convention). Id. The result is that arbitral awards enjoy greater
recognition than judicial decisions. Id.
122. International Chamber of Commerce, Introducing ICC Dispute Resolution
Services, at http://www.iccwbo.org/court/english/intro_court/introduction.asp (last
visited Nov. 6, 2005); International Chamber of Commerce, supra note 119; see
William K. Slate II, International Arbitration: Do Institutions Make a Difference?,
31 WAKE FOREST L. REV. 41, 47 (1996):
The ICC Rules contemplate further institutional guidance and supervision over the
arbitration proceedings than do the rules of other institutions. These rules delegate
to the institution certain functions that are typically reserved for the arbitrator. For
instance, whereas other institutional rules provide that it is the arbitrator who
decides the prima facie validity of the arbitration agreement, under the ICC Rules,
it is the institution that has the authority to make this determination.
Additionally, and rather importantly, the ICC reviews the arbitrator’s final award,
prior to its signing, to ensure its enforceability. The ICC Rules require the
arbitrator, before signing the award, to submit it in draft form to the International
Court of Arbitration. The Court may lay down modifications as to the form of the
award and, without affecting the arbitrator’s liberty of decision, draw the
arbitrator’s attention to substantive issues.
Id.
123. International Chamber of Commerce, supra note 119.
124. See International Centre for Settlement of Investment Disputes, About
ICSID, at http://www.worldbank.org/icsid/about/about.htm (last visited Oct. 26,
2005). The ICSID was established under the Convention on the Settlement of
Investment Disputes between States and Nationals of Other States, October 14,
1966. Id.

2006] ARBITRATION: THE BASICS 29
cover letter to the agency requesting arbitration, (2) a check for the filing
fee, and (3) a copy of the contract highlighting the arbitration clause.
The cover letter to the arbitration agency should provide a basic
description of the claim, as well as the name, address and phone number
of the respondent. 125 Once these materials are received by the agency
from the claimant, the agency will take over. The agency will ensure the
respondent has been notified that arbitration has been requested and will
send copies of the claim and the arbitration clause to the respondent, who
will have an opportunity to respond within a certain time limit. 126
C. Choosing the Arbitrator
After the request for arbitration has been filed with the arbitration
agency and the respondent has had an opportunity to answer, the parties
decide on the arbitrator(s) who will resolve the dispute. The parties are
free to choose the number of arbitrators that will be used. Typically,
agency rules allow for one arbitrator or a panel of three arbitrators, with
three arbitrators being the typical number of arbitrators in international
disputes. 127 The trend today in most State and federal arbitrations is to
use a single arbitrator in order to reduce the cost. 128
Whether the parties opt for a single arbitrator or a panel of three
arbitrators, it is important to weigh the relative benefit of each method
against the corresponding cost. It is economical to have one neutral
arbitrator chosen by mutual agreement between the parties. But it can be
advantageous to have three arbitrators to provide various levels and types
of expertise, to allow the arbitrators the ability to divide up tasks, and to
give the arbitrators the opportunity to meet and confer with each other
about the facts and applicable law. 129 A panel of three arbitrators is the
best choice in complex cases. The usual method of picking three
125. See e.g., AAA Rules, supra note 37, R-4; ICC Rules, supra note 84, arts. 4
& 5.
126. See sources cited supra note 125.
127. Jack J. Coe, Jr., Pre-hearing Techniques to Promote Speed and Cost-
Effectiveness—Some Thoughts Concerning Arbitral Process Design, 2 PEPP. DISP.
RESOL. L.J. 53, 59-60 (2002) (“Three-person tribunals, although not a mandatory
characteristic of international arbitration, are part of a standard model. Indeed, under
many formulae, a tribunal of three is the default rule.”).
128. See AAA Rules, supra note 37, R. 15 (providing that, “[i]f the arbitration
agreement does not specify the number of arbitrators, the dispute shall be heard and
determined by one arbitrator, unless the AAA, in its discretion, directs that three
arbitrators be appointed”).
129. Id.

30 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
arbitrators is: the claimant picks one, the respondent picks one, and the
two arbitrators pick the third arbitrator, who will be the chair of the
arbitration panel.
For a three person arbitral tribunal, the selection process permits
each party to select an arbitrator with the third being chosen by the two
party-appointed arbitrators. 130 For example, the AAA recommends the
following clause in the arbitration agreement:
The arbitrator selected by the claimant and the arbitrator selected by
respondent shall, within ten days of their appointment, select a third
neutral arbitrator. In the event that they are unable to do so, the
parties or their attorneys may request the American Arbitration
Association to appoint the third neutral arbitrator. 131
If the parties choose to use a single arbitrator, the agency will send a
list of qualified arbitrators to both parties. Typically, there will be five to
seven names of qualified arbitrators, who the agency has vetted and
deemed qualified to arbitrate the claims. The claimant and respondent
attorneys discuss the names on the list. They may decide to pick one
person from the list, or they may decide to use the “alternative strike”
method. The U.S. Federal Mediation and Conciliation Service allows
“[e]ach party alternately strikes a name from the submitted panel until
one remains.” 132 Another method requires the parties to rank their
choices, and the person with the highest rank is appointed arbitrator. 133
130. See AAA, Drafting Dispute Resolution Clauses, supra note 45; see also ICC
Rules, supra note 84, art. 8 (“[E]ach party shall nominate . . . one arbitrator for
confirmation. If a party fails to nominate an arbitrator, the appointment shall be
made by the Court. The third arbitrator, who will act as chairman of the Arbitral
Tribunal, shall be appointed by the Court.”).
131. AAA, Drafting Dispute Resolution Clauses, supra note 45.
132. Federal Mediation and Conciliation Service, Policies and Procedures, §
1404.12, Selection by Parties and Appointments of Arbitrators, available at
http://www.fmcs.gov/internet/itemDetail.asp?categoryID=197&itemID=16959 (last
visited Oct. 16, 2005).
133. See id. The FMCS rules allow “[e]ach party advises the OAS of its order of
preference by numbering each name on the panel and submitting the numbered lists
in writing to the OAS. The name that has the lowest combined number will be
appointed.” Id.; see also AAA Rules, supra note 37, R-11. The AAA commercial
arbitration rules provide that:
If the parties are unable to agree upon an arbitrator, each party to the dispute shall
have 15 days from the transmittal date in which to strike names objected to, number
the remaining names in order of preference, and return the list to the AAA. . . .
From among the persons who have been approved on both lists, and in accordance
with the designated order of mutual preference, the AAA shall invite the

2006] ARBITRATION: THE BASICS 31
If the parties cannot agree on an arbitrator from the first list, either can
request the agency to send another list of arbitrators. The AAA rules
provide that the agency may make the appointment if the first list does
not prompt the appointment of an arbitrator. 134 Most arbitration agencies
will permit two lists to be used. If the parties cannot agree to an
arbitrator after the second list is sent, the agency will appoint an
arbitrator. 135
However the parties set up the method of choosing the arbitrator, it
is important to note that, in arbitration, “[t]he arbitrator is the decisive
element. . . . his or her ability, expertness, fairness and impartiality are at
the base of the arbitration process.” 136 The arbitrator decides the
outcome of the case; thus, it is important for parties to take the time to
decide if one or three arbitrators will be best for their potential dispute.
D. Notification Requirements
Once the parties have decided on the arbitrator(s), the arbitration
agency notifies the arbitrator that he or she has been chosen. The
American Arbitration Association sends a written confirmation letter
acceptance of an arbitrator to serve.
Id.
134. AAA Rules, supra note 37, R-11. If the parties cannot decide on an
arbitrator from the first list, “the AAA shall have the power to make the
appointment from among other members of the National Roster without the
submission of additional lists.” Id.
135. The rules for appointing arbitrators vary according to the agency utilized.
See ICC Rules, supra note 84, art. 8. According to the ICC rules:
Where the parties have agreed that the dispute shall be settled by a sole arbitrator,
they may, by agreement, nominate the sole arbitrator for confirmation. If the parties
fail to nominate a sole arbitrator . . . the sole arbitrator shall be appointed by the
Court.
Id. See also Federal Mediation and Conciliation Service, supra note 132,
§ 1404.11. The FMCS rules state that:
If the parties do not agree on an arbitrator from the first panel, the OAS will furnish
a second and third panel to the parties upon joint request and payment of an
additional fee. Requests for a second or third panel should be accompanied by a
brief explanation as to why the previous panel(s) was inadequate. If parties are
unable to agree on a selection after having received three panels, the OAS will
make a direct appointment upon joint request.
Id.
136. GABRIEL WILNER, DOMKE ON COMMERCIAL ARBITRATION 24-1 (Larry
Edmonson ed., Thomson West 2003).

32 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
notifying the arbitrator he/she has been chosen. The AAA Arbitration
Rules for Resolving Commercial Financial Disputes state:
Notice of the appointment of any arbitrator, whether appointed
unilaterally by a party, mutually by the parties or by the AAA,
shall be sent to the arbitrator by the AAA, together with a copy of
these rules, and the signed acceptance of the arbitrator shall be
filed with the AAA prior to the opening of the first hearing. 137
It is usual for one or both of the attorneys to send confirming letters
to the arbitrator informing the arbitrator that he/she has been chosen as
the arbitrator in the matter. Under the Federal Mediation and
Conciliation Service rules, the parties are responsible for notifying the
Office of Arbitration Services (OAS) “of their selection of an arbitrator
or of the decision not to proceed with arbitration. Upon notification of
the selection of an arbitrator, the OAS will make a formal appointment of
the arbitrator.” 138
The party seeking to begin the arbitration process is required to
notify the respondent. Fundamental fairness requires that the respondent
be notified of the claims being brought against them. 139 If the parties
utilize an agency, notice of the claim is sent by the agency to the
respondent. 140 The respondent has an opportunity to respond and/or
counterclaim. 141
E. Scheduling
Under the FMCS rules, “[t]he arbitrator, upon notification of
appointment, is expected to communicate with the parties within
[fourteen] days to arrange for preliminary matters, such as the date and
place of hearing.” 142 The arbitrator will provide potential hearing dates
for which the arbitrator is available. The usual way for the arbitrator to
contact the advocates for the claimant and the respondent is to send a
letter jointly addressed to both informing them of a series of dates the
arbitrator is available. The arbitrator will ask the parties to contact each
137. American Arbitration Association, supra note 89.
138. Federal Mediation and Conciliation Service, supra note 132, § 1404.12.
139. Lewis Maltby, Paradise Lost—How the Gilmer Court Lost the Opportunity
for Alternative Dispute Resolution to Improve Civil Rights, 12 N.Y.L. SCH. J. HUM.
RTS. 1, 18 (1994).
140. AAA Rules, supra note 37.
141. See id.
142. Federal Mediation and Conciliation Service, supra note 132, § 1404.12.

2006] ARBITRATION: THE BASICS 33
other and choose a mutually convenient date. A typical letter from the
arbitrator is jointly addressed to the claimant’s attorney and the
respondent’s attorney saying: “Below are dates the arbitrator is available
for the arbitration hearing. Kindly contact each other immediately,
choose a mutually convenient date, time, and place. Let the arbitrator
know right away. Please know the arbitrator has these dates out in other
matters, so the sooner you choose the better.” Because the typical
arbitrator is busy, it is important for the advocates to contact the arbitrator
as soon as possible with a mutually convenient date for the arbitration, so
the arbitrator can block the time on his or her calendar. If the parties are
having difficulty arranging a time, the arbitrator will have a conference
call with both advocates. At the conference call, the parties and the
arbitrator coordinate their calendars and choose a mutually convenient
date for the arbitration. The sooner the date, the more likely the
arbitration process is able to fulfill the “quick” objective of arbitration.
Some agencies leave it to the arbitrator to arrange a mutually
convenient time. Others agencies arrange for the arbitration date by
talking with the advocates for the claimant, the respondent, and the
arbitrator. 143 Once a time is blocked on the arbitrator’s calendar the
parties are responsible for a cancellation fee if the matter is settled prior
to the hearing.
F. Arbitrator Disclosure Requirements
Arbitrators as neutrals must disclose all actual and potential
conflicts of interest reasonably known. 144 After disclosure, the neutral
143. See AAA Rules, supra note 37, R-22 (“The arbitrator shall set the date,
time, and place for each hearing. The parties shall respond to requests for hearing
dates in a timely manner, be cooperative in scheduling the earliest practicable date,
and adhere to the established hearing schedule.”); ICC Rules, art. 21 (stating that
“[w]hen a hearing is to be held, the Arbitral Tribunal, giving reasonable notice, shall
summon the parties to appear before it on the day and at the place fixed by it”).
144. See AAA Rules, supra note 37, R-16. Any person appointed or to be
appointed as an arbitrator shall disclose to the AAA any circumstance likely to give
rise to justifiable doubt as to the arbitrator’s impartiality or independence. Id.
CANON II. AN ARBITRATOR SHOULD DISCLOSE ANY INTEREST
OR RELATIONSHIP LIKELY TO AFFECT IMPARTIALITY OR
WHICH MIGHT CREATE AN APPEARANCE OF PARTIALITY.
A. Persons who are requested to serve as arbitrators should, before
accepting, disclose:
(1) any known direct or indirect financial or personal interest in the

34 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
outcome of the arbitration;
(2) any known existing or past financial, business, professional or personal
relationships which might reasonably affect impartiality or lack of
independence in the eyes of any of the parties. For example, prospective
arbitrators should disclose any such relationships which they personally
have with any party or its lawyer, with any co-arbitrator, or with any
individual whom they have been told will be a witness. They should also
disclose any such relationships involving their families or household
members or their current employers, partners, or professional or business
associates that can be ascertained by reasonable efforts;
(3) the nature and extent of any prior knowledge they may have of the
dispute; and
(4) any other matters, relationships, or interests which they are obligated to
disclose by the agreement of the parties, the rules or practices of an
institution, or applicable law regulating arbitrator disclosure.
B. Persons who are requested to accept appointment as arbitrators should
make a reasonable effort to inform themselves of any interests or
relationships described in paragraph A.
C. The obligation to disclose interests or relationships described in
paragraph A is a continuing duty which requires a person who accepts
appointment as an arbitrator to disclose, as soon as practicable, at any stage
of the arbitration, any such interests or relationships which may arise, or
which are recalled or discovered.
D. Any doubt as to whether or not disclosure is to be made should be
resolved in favor of disclosure.
E. Disclosure should be made to all parties unless other procedures for
disclosure are provided in the agreement of the parties, applicable rules or
practices of an institution, or by law. Where more than one arbitrator has
been appointed, each should inform the others of all matters disclosed.
F. When parties, with knowledge of a person’s interests and relationships,
nevertheless desire that person to serve as an arbitrator, that person may
properly serve.
G. If an arbitrator is requested by all parties to withdraw, the arbitrator
must do so. If an arbitrator is requested to withdraw by less than all of the
parties because of alleged partiality, the arbitrator should withdraw unless
either of the following circumstances exists:
(1) An agreement of the parties, or arbitration rules agreed to by the
parties, or applicable law establishes procedures for determining challenges
to arbitrators, in which case those procedures should be followed; or
(2) In the absence of applicable procedures, if the arbitrator, after carefully
considering the matter, determines that the reason for the challenge is not

2006] ARBITRATION: THE BASICS 35
shall decline to participate unless all parties choose to retain the neutral.
G. Tendency to Delay
There is a tendency on the part of the advocates to delay scheduling
the arbitration hearing. It often is simply a matter of procrastination.
Advocates are busy. Parties delay by failing to cooperate in scheduling,
by refusing to stipulate to uncontested facts, and by failing to respect
time tables and document exchanges. 145 The rules of the Federal
Mediation and Conciliation Services warn that, “[t]he arbitrator may,
unless prohibited by law, proceed in the absence of any party who, after
due notice, fails to be present or to obtain a postponement.” 146
Arbitrators themselves can be guilty of delaying the process.
Although an arbitrator’s role is markedly different from that of a judge,
Changing the name of homosapiens from “judge” to “arbitrator”
does not change his procrastination stripes. When he has a big
complex case he wants to carve out a big unit of time to work on
it. Whether he is called “judge” or “arbitrator,” a steady stream of
smaller, easier projects flow across his desk, pre-empt his time, so
that he never gets that big unit of time he wants for this complex
case. 147
Most arbitrators understand it requires some pressure to push the
advocates into choosing a time which is “sooner rather than later.” A key
objective of arbitration is quick resolution of disputes. The further out
the arbitration is scheduled, the less likely this objective is fulfilled.
Conflicting schedules of the parties can cause the arbitration to be
delayed for a significant period of time; sometimes exceeding the time it
substantial, and that he or she can nevertheless act and decide the case
impartially and fairly.
H. If compliance by a prospective arbitrator with any provision of this
Code would require disclosure of confidential or privileged information,
the prospective arbitrator should either:
(1) Secure the consent to the disclosure from the person who furnished the
information or the holder of the privilege; or
(2) Withdraw.
Id.
145. William Sharpe, The Art of Being a Good Advocate, 50 DISP. RESOL. J. 60,
61 (Jan. 1995).
146. Federal Mediation and Conciliation Service, supra note 132, § 1404.13.
147. Arnold, supra note 96, at 106.

36 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
would have taken to litigate the case in court. 148 If a dispute cannot be
heard and settled by arbitration much sooner than it would be heard and
decided in court, arbitration looses its efficacy. Delay usurps the promise
of arbitration as “quick, efficient, economical and fair.” 149
H. Time Required
There is a tendency on the part of advocates to underestimate the
amount of time required for the arbitration. 150 It is not unusual for an
advocate to inform the arbitrator that the hearing “will last, at most, one
day.” But experience has shown that more than one day might be
required for even some of the simplest matters. Advocates need to be
aware of the fact that arbitration may require a more significant time
commitment than expected and should avoid understating to the parties
and the arbitrator the time needed to resolve the dispute. Remember, it
takes time for the question and answer method of direct examination and
cross examination to develop the testimony. Be realistic in the estimate
of the entire time for the arbitration by knowing the number of witnesses
and the approximate time it will take for direct examination and cross
examination of each of the witnesses. Many agencies permit expedited
arbitration which limits the time an arbitration can run—typically, one
day.
VI. PRE-ARBITRATION MATTERS
A. Discovery
A primary reason parties choose arbitration is to avoid the expense
and time involved in the discovery necessary to prepare a case if it went
to court. The arbitration process attempts to avoid extensive discovery
that is often involved in a trial. There is very limited discovery in
arbitration. The United State Court of Appeals for the Fourth Circuit
recognized that “[a]n arbitration hearing is not a court of law . . . . When
contracting parties stipulate that disputes will be submitted to arbitration,
they relinquish the right to certain procedural niceties that are normally
associated with a formal trial . . . . One of these accoutrements is the right
148. Allen Poppleton, The Arbitrator’s Role in Expediting the Large and
Complex Commercial Case, 36-DEC. DISP. RESOL. J. 6 (Dec. 1981).
149. See text accompanying notes 33-44.
150. John Wilkinson, Streamlining Arbitration of the Complex Case, 55 DISP.
RESOL. J. 8, 10 (Oct. 2000).

2006] ARBITRATION: THE BASICS 37
to pre-trial discovery.” 151
Civil court trials in the United States often involve extensive
discovery, using interrogatories, depositions, and requests for production
of documents. Arbitration involves some discovery, but it is intended to
be limited because arbitration is a process intended to expedite the
resolution of the dispute. A telephone conference between the arbitrator
and advocates can deal with almost any discovery matter that needs to be
addressed. The AAA describes the discovery process this way:
At the request of any party or at the discretion of the arbitrator,
consistent with the expedited nature of arbitration, the arbitrator
may direct the production of documents and other information,
and the identification of any witnesses to be called. At least five
business days prior to the hearing, the parties shall exchange
copies of all exhibits they intend to submit at the hearing. The
arbitrator is authorized to resolve any disputes concerning the
exchange of information. 152
B. Subpoena Power of Persons and Materials
An arbitrator in the United States is given the power to subpoena a
person or materials, and such subpoenas are enforceable in a court of
law. The Federal Arbitration Act permits an arbitrator to issue a
subpoena requiring a person to testify at the arbitration or a subpoena
duces tecum to bring materials to the arbitration. 153 The Uniform
Arbitration Act (UAA) 154 and the Revised Uniform Arbitration Act of
151. Burton v. Bush, 614 F.2d 389, 390 (4th Cir. 1980).
152. AAA Rules, supra note 37, R-21.
153. 9 U.S.C. § 7 (2004) (stating that an arbitrator “may summon in writing any
person to attend before them or any of them as a witness and in a proper case to
bring with him or them any book, record, document, or paper which may be deemed
material as evidence in the case”).
154. UNIFORM ARBITRATION ACT (1956), available at http://www.law.upenn.edu
/bll/ulc/fnact99/1920_69/uaa55.htm (last visited Nov. 7, 2005). Prior to the Revised
Uniform Arbitration Act (RUAA) (2000), the UAA (1956) was adopted by fortynine
of the states in the United States. CARBONNEAU, supra note 14, at 113.
Several states have repealed adoption of the UAA in favor of the RUAA. REVISED
UNIFORM ARBITRATION ACT § 17(a), amended 2000, available at http://www.nccus
l.org/update (last visited Nov. 7, 2005). As of 2004, the RUAA has been adopted
by twenty-eight states and the District of Columbia in some form (also, Oklahoma
has enacted legislation to adopt the RUAA in 2006). UNIFORM LAWS ANNOTATED,
ARB., REFS & ANNOS, UNIFORM ARBITRATION ACT (1956) REFS & ANNOS, (current
through 2004 Annual Meeting of the National Conference of Commissioners on

38 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
2000 (RUAA) 155 permit an arbitrator to issue a subpoena for the person
or a subpoena duces tecum for materials. 156 Under the UAA, subpoenas
Uniform State Laws).
155. REVISED UNIFORM ARBITRATION ACT, supra note 154. The RUAA is the
result of the work performed by the National Conference of Commissioners on
Uniform State Laws (NCCUSL). “[NCCUSL], now 113 years old, provides states
with non-partisan, well-conceived and well-drafted legislation that brings clarity
and stability to critical areas of the law. NCCUSL’s work supports the federal
system and facilitates the movement of individuals and the business of
organizations with rules that are consistent from state to state.” Id. The entire
RUAA is currently adopted by twelve states (Alaska has adopted without repeal of
their RUAA adoption).
156. UNIFORM ARBITRATION ACT § 17(a). “An arbitrator may issue a subpoena
for the attendance of a witness and for the production of records and other evidence
at any hearing and may administer oaths. A subpoena must be served in the manner
for service of subpoenas in a civil action and, upon [motion] to the court by a party
to the arbitration proceeding or the arbitrator, enforced in the manner for
enforcement of subpoenas in a civil action. Id.; see American Arbitration
Association, Commercial/Business Forms, available at http://www.adr.org/upload/
LIVESITE/Forms/downlLoadable/subpoena.pdf (last visited Oct. 19, 2005). The
AAA provides standard forms for the subpoena of a witness:
The Arbitration Tribunals of the
American Arbitration Association
_________________________________________________________
In the Matter of the Arbitration between
Subpoena
_________________________________________________________
FROM THE PEOPLE OF THE STATE OF
to
GREETING:
WE COMMAND YOU that, all business and excuses being laid aside, you and each
of you appear
and attend before
, arbitrator(s)
acting under the arbitration law of this state, at
___________________________________________________________________
___________
(address)
on the _______________day of_______________ , 20 ___, at
____________o’clock, to testify and
give evidence in a certain arbitration, then and there to be held between the above
entitled parties.
Signed: ______________________________
Signed: ______________________________
Arbitrator(s)
Requested by: _______________________________

2006] ARBITRATION: THE BASICS 39
can be issued “for the attendance of witnesses and for the production of
___________________________________________
Name of Representative
___________________________________________
Address Zip Code
___________________________________________
Telephone
Dated:______________________________________
Form G9-11/89
Id.
The AAA also provides standard forms for a subpoena duces tecum:
The Arbitration Tribunals of the
American Arbitration Association
_________________________________________________________
In the Matter of the Arbitration between
Subpoena Duces Tecum
(Documents)
_________________________________________________________
FROM THE PEOPLE OF THE STATE OF
to
GREETING:
WE COMMAND YOU that, all business and excuses being laid aside, you and each
of you appear and attend before
, arbitrator(s)
acting under the arbitration law of this state, at
___________________________________________________________________
___________
(address)
on the ______________ day of ______________ , 20___ , at ___________o’clock,
to testify and
give evidence in a certain arbitration, then and there to be held between the above
entitled parties, and that you bring with you and produce certain
now in your custody.
Signed: ______________________________
Signed: ______________________________
Arbitrator(s)
Requested by: _______________________________
___________________________________________
Name of Representative
___________________________________________
Address Zip Code
___________________________________________
Telephone
Dated:______________________________________
Form G9-11/89
Id.

40 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
books, records, documents and other evidence.” 157 Under the RUAA,
“An arbitrator may issue a subpoena for the attendance of a witness for
the production of records and other evidence at any hearing and may
administer oaths.” 158
Under the Uniform Arbitration Act, “[a]ll laws compelling a person
under subpoena to testify . . . apply to an arbitration proceeding as if the
controversy were the subject of a civil action in this State.” 159 For
example, the Uniform Arbitration Act of Minnesota provides that a
subpoena may be “enforced, in the manner provided by law for the
service and enforcement of subpoenas in a civil action.” 160 Section 7 of
the Federal Arbitration Act provides for enforcement of subpoenas if the
jurisdiction permits their use:
[I]f any person or persons so summoned to testify shall refuse or
neglect to obey said summons, upon petition the United States
district court for the district in which such arbitrators, or a
majority of them, are sitting may compel the attendance of such
person or persons before said arbitrator or arbitrators, or punish
said person or persons for contempt in the same manner provided
by law for securing the attendance of witnesses or their
punishment for neglect or refusal to attend in the courts of the
United States. 161
C. Pre-Hearing Issues
If there are issues relating to discovery, confidentiality, or difficult
and contentious issues, it may be necessary to hold a pre-hearing
conference. An extra hearing is contrary to the “economy” objective of
arbitration. Arbitration is supposed to be quicker, more efficient, and less
costly than a trial. However, a pre-hearing conference held weeks before
the arbitration may be necessary to deal with difficult preliminary issues,
“to specify the issues to be resolved [or] to stipulate uncontested
facts,” 162 or to deal with myriad of disagreements which can arise prior
157. UNIFORM ARBITRATION ACT, § 17(a) (2000).
158. Id.
159. Id. § 17(f).
160. MINN. STAT. § 572.14 (2004).
161. 9 U.S.C. § 7 (2004); see Robert E. Benson, The Power of Arbitrators and
Courts to Order Discovery in Arbitration—Part II, 25-MAR. COLO. LAW 35, 36-37
(Mar. 1996).
162. American Arbitration Association, Patent Arbitration Rules, R-9 (July 1,
2003), available at http://www.adr.org/sp.asp?id=26401 (last visited Dec. 8, 2005)

2006] ARBITRATION: THE BASICS 41
to the arbitration hearing. The American Arbitration Association
recognizes that a preliminary hearing may be necessary,
[T]he arbitrator may, at the preliminary hearing, establish (i) the
extent of and schedule for the production of relevant documents
and other information, (ii) the identification of any witnesses to be
called and (iii) a schedule for further hearings to resolve the
dispute. 163
The Pre-Hearing Conference might be held months, weeks, or days
before the arbitration hearing.
Confidentiality issues can arise during the pre-hearing phase. For
example, in labor arbitration, one of the parties may be seeking private
data protected by Government Data Practices laws. Many data practice
laws in the U.S. give authority to arbitrators to issue subpoenas and hold
hearings prior to an arbitration to determine if special protection needs to
be given to the data. 164
[hereinafter AAA Patent Arbitration Rules]; see also AAA Rules, supra note 37, R-
20.
163. AAA Patent Arbitration Rules, supra note 162, R-9.
164. See, e.g., MINN. STAT. § 13.03, subd. 6 (2004). The Minnesota Statute
states:
If a state agency, political subdivision, or statewide system opposes discovery of
government data or release of data pursuant to court order on the grounds that the
data are classified as not public, the party that seeks access to the data may bring
before the appropriate presiding judicial officer, arbitrator, or administrative law
judge an action to compel discovery or an action in the nature of an action to
compel discovery.
The presiding officer shall first decide whether the data are discoverable or
releasable pursuant to the rules of evidence and of criminal, civil, or administrative
procedure appropriate to the action.
If the data are discoverable the presiding officer shall decide whether the benefit to
the party seeking access to the data outweighs any harm to the confidentiality
interests of the agency maintaining the data, or of any person who has provided the
data or who is the subject of the data, or to the privacy interest of an individual
identified in the data. In making the decision, the presiding officer shall consider
whether notice to the subject of the data is warranted and, if warranted, what type
of notice must be given. The presiding officer may fashion and issue any protective
orders necessary to assure proper handling of the data by the parties. If the data are
a videotape of a child victim or alleged victim alleging, explaining, denying, or
describing an act of physical or sexual abuse, the presiding officer shall consider
the provisions of section 611A.90, subdivision 2, paragraph (b).
Id.; see, e.g., CAL. CIV. CODE § 56.10(b)(5) (2004). The California Code provides
that:
A provider of health care, a health care service plan, or a contractor shall disclose

42 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
A pre-hearing conference may be required to deal with
“arbitrability”—whether the dispute is actually subject to arbitration.
Does the arbitrator have authority to determine if the dispute is
arbitrable? Courts are in disagreement concerning the question of who
determines “arbitrability.” Does the arbitrator at a pre-hearing
conference determine the answer or does a court? Some courts have held
that arbitrators are to make determinations relating to arbitrability. 165 In
international law, the concept of kompetenz-kompetenz permits the
arbitrator to determine his or her own competence over this primary
jurisdictional matter. 166 U.S. courts favor assigning the duty to the
courts, but allow the parties to assign determination of jurisdictional
matters to the arbitrator via the arbitration clause itself, 167 whereas
medical information if the disclosure is compelled by . . . an arbitrator or arbitrator
panel, when arbitration is lawfully requested by either party, pursuant to a
subpoena duces tecum issued under Section 1282.6 of the Code of Civil Procedure,
or any other provision authorizing discovery in a proceeding before an arbitrator or
arbitration panel.
Id.
165. See Atcas v. Credit Clearing Corp., 197 N.W.2d 448, 452 (Minn. 1972)
(overruled on other grounds). The Minnesota Supreme Court held that:
(1) If the parties evinced a clear intent to arbitrate a controversy arising out of
specific provisions of the contract, the matter is for the arbitrators to determine and
not the court. (2) If the intention of the parties is reasonably debatable as to the
scope of the arbitration clause, the issue of arbitrability is to be initially determined
by the arbitrators subject to the rights of either party [to submit an application
requesting that the court vacate the award].
Id.
166. See LEW ET AL., supra note 81, at 332-34; STEPHEN M. SCHWEBEL,
INTERNATIONAL ARBITRATION: THREE SALIENT PROBLEMS 2 (Cambridge Univ.
Press 1987).
167. See First Options of Chi., Inc. v. Kaplan, 514 U.S. 938 (1995); Allstate Ins.
Co. v. Stinebaugh, 824 A.2d 87, 94 (Md. 2003) (quoting Gold Coast Mall Inc. v.
Larmar Corp., 468 A.2d 91, 95-97 (Md. 1983)). The Maryland Supreme Court
delegated the responsibility for determining arbitrability differently than the
Minnesota court, stating that:
[I]f an arbitration clause is clear, it is initially for the courts to determine whether
the subject matter of a dispute falls within the scope of the arbitration clause. . . [I]f
an arbitration clause is unclear “as to whether the subject matter of the dispute falls
within the scope of the arbitration agreement,” the question of arbitrability
ordinarily should be left to the arbitrator.
Id. (internal citations omitted). The United States Supreme Court took an all
together different approach, stating that “[t]he question whether parties have
submitted a particular dispute to arbitration, i.e., the ‘question of arbitrability,’ is
‘an issue for judicial determination unless the parties clearly and unmistakably

2006] ARBITRATION: THE BASICS 43
international courts favor allowing the arbitrator to determine
jurisdictional issues. 168
Another important concept which works in tandem with kompetenzkompetenz
is the “separability” doctrine. This doctrine states that the
arbitration clause is enforceable, separate and distinct from the remainder
of the contract, and survives a finding that the contract is void unless the
arbitration clause itself is found to be invalid. 169 In June 2005, the
United States Supreme Court granted certiorari in Cardegna v Buckeye
Check Cashing, Inc. to determine this important question of
“separability” and who has the authority to determine “arbitrability,” the
arbitrator or a judge. 170
The arbitrator’s authority is derived from the contract, which serves
as the basis for the arbitrator’s jurisdiction in arbitration proceedings. 171
In the absence of a valid, binding agreement in writing or a court
mandate to go to arbitration, the arbitrator is without power to hear the
case. 172 Agreements not properly ratified, procured by fraud, or expired
are not valid agreements and, therefore, may deprive the arbitrator of
authority to hear the case. 173 In other words, the case is not “arbitrable.”
In situations where the contract was procured through fraud, however,
the “separability doctrine” permits the arbitration clause to stand alone,
unless the fraud goes also to the making of the arbitration clause itself. 174
provide otherwise.’” Howsam v. Dean Witter Reynolds, Inc., 531 U.S. 79, 79
(2003) (quoting AT & T Techs., Inc. v. Communications Workers, 475 U.S. 643,
649 (1986)).
168. See LEW ET AL., supra note 81, at 330-32.
169. CARBONNEAU, supra note 14, at 20-21.
170. Cardegna v. Buckeye Check Cashing, Inc., 894 So. 2d 860 (Fla. 2005), cert.
granted, 125 S. Ct. 2937 (U.S. 2005) (arguing that allowing arbitration clause to
survive otherwise void and illegal contract would be wrong result).
171. NOLAN, supra note 3, at 88. The United States Court of Appeals for the
Seventh Circuit noted that “arbitrators derive their authority to resolve disputes
from the prior agreement of the parties to submit their grievances to arbitration.”
Int’l Med. Group, Inc. v. Am. Arbitration Ass’n, Inc., 312 F.3d 833, 842 (7th Cir.
2002) (quoting AT&T Techs., Inc v. Communications Workers of Am., 475 U.S.
643, 648 (1986)).
172. Id. at 88-89; see First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 943
(1995). Justice Breyer noted that “arbitration is simply a matter of contract between
the parties; it is a way to resolve those disputes—but only those disputes—that the
parties have agreed to submit to arbitration.” Id.
173. First Options, 514 U.S. at 943.
174. SCHWEBEL, supra note 166, at 2-3. Under the “separability doctrine,” when
“a dispute arises concerning the initial validity or continued existence of the main
contract, the arbitration clause, being independent, continues to be valid and binding

44 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
Another issue relating to arbitrability, which may require
consideration at a pre-hearing conference, involves whether parties are
free to submit statutory claims to arbitration. Statutory claims may be
the subject of an arbitration agreement, enforceable pursuant to the
FAA. 175 The United States Supreme Court has held that antitrust 176 and
RICO 177 claims are among the statutory claims that parties may agree to
arbitrate. The Court said “[b]y agreeing to arbitrate a statutory claim, a
party does not forgo the substantive rights afforded by the statute; it only
submits to their resolution in an arbitral, rather than a judicial, forum.” 178
At the pre-hearing conference, an arbitrator may be tempted to put
on a mediator’s hat. Should an arbitrator attempt to mediate a dispute
during pre-arbitration hearings? Should he/she use med-arb as a
technique? There is much debate on the matter. Most arbitrators avoid
on the parties even if the main contract is void.” Janet A. Rosen, Arbitration Under
Private International Law: The Doctrines of Separability and Competence de la
Competence, 17 FORDHAM INT’L L.J. 599, 607 (1994). For the arbitration clause to
be struck down, the fraud must go to the making of the arbitration clause itself. See
Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 402 (1967) (stating
that arbitration clauses “are ‘separable’ from the contracts in which they are
embedded, and that where no claim is made that fraud was directed to the
arbitration clause itself, a broad arbitration clause will be held to encompass
arbitration of the claim that the contract itself was induced by fraud”); Republic of
Nicaragua v. Standard Fruit Co., 937 F.2d 469, 477 (9th Cir. 1991); Sauer-Getriebe
KG v. White Hydraulics, Inc., 715 F.2d 348, 350 (7th Cir. 1983).
175. Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 35 (1991). The Court
in Gilmer stated that “[i]t is by now clear that statutory claims may be the subject of
an arbitration agreement, enforceable pursuant to the FAA.” Id. at 26. The Court
held that claims under the Age Discrimination in Employment Act were arbitrable.
Id. at 35. See also EEOC v. Waffle House, Inc., 534 U.S. 279, 296 (2002) (holding
that claims brought by employee against employer may be subject to arbitration
under the Americans with Disabilities Act, but such arbitration does not interfere
with the EEOC’s right to bring a claim in court on behalf of the employee);
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 619-20
(1985) (holding that claims under the Sherman Antitrust Act are arbitrable).
176. Mitsubishi Motors Corp., 473 U.S. at 629 (recognizing that “concerns of
international comity, respect for the capacities of foreign and transnational tribunals,
and sensitivity to the need of the international commercial system for predictability
in the resolution of disputes require that we enforce the parties’ agreement [to
arbitrate their antitrust claims]”).
177. Shearson /Am. Express, Inc. v. McMahon, 482 U.S. 220, 242 (1987)
(finding “no basis for concluding that Congress intended to prevent enforcement of
agreements to arbitrate RICO claims,” and thus, a “RICO claim is arbitrable under
the terms of the [Federal] Arbitration Act”).
178. Mitsubishi Motors Corp., 534 U.S. at 628.

2006] ARBITRATION: THE BASICS 45
attempting to mediate the dispute. 179 But some commentators argue that
it is appropriate for the arbitrator to assume the hybrid role of
mediator/arbitrator, 180 especially during the pre-hearing conference. 181
VII. THE HEARING
A. The Place
An arbitration hearing can be scheduled anywhere in the world. 182
Considerations similar to those for “forum non conveniens” govern the
selection of an appropriate place for an arbitration. The Supreme Court
set forth factors used to determine “forum non conveniens,” including:
[T]he relative ease of access to sources of proof; availability of
compulsory process for attendance of unwilling, and the cost of
obtaining attendance of willing, witnesses; possibility of view of
premises, if view would be appropriate to the action; and all other
practical problems that make trial of a case easy, expeditious and
inexpensive. There may also be questions as to the enforceability
of a judgment if one is obtained. 183
Arbitration proceedings are not limited, like a trial, to a courtroom.
They can be held in any convenient place. Arbitration proceedings can
be held in a principal place of business, a hotel, a conference center, a
lawyer’s office, or any other place that is convenient for the parties and
the arbitrator. If the parties are working with an arbitration agency, such
as the AAA, ICC, or LCIA, there are facilities provided by the agency.
179. See CARBONNEAU, supra note 14, at 10-11 (criticizing the evolution of
arbitration beyond the traditional process, and med-arb specifically).
180. See JOHN W. COOLEY, ARBITRATION ADVOCACY 3 (2d ed. 2003).
181. Id. at 90. For more information on med-arb, see JOHN W. COOLEY,
MEDIATION ADVOCACY § 1.1 (2d ed. 2002). Med-arb (mediation-arbitration) is a
hybrid process in which the parties first mediate their dispute with the assistance of
a third-party neutral. Id. Once mediation is completed, the parties submit any
unresolved issues to arbitration. Id. The same party may conduct both the
mediation and arbitration, or the parties may select a different neutral to conduct the
arbitration. Id. Med-arb is different than traditional mediation because “it gives the
mediator the power to decide the matter for the parties if they are unable to do so
themselves. Med-arb also differs from traditional arbitration because the mediator’s
role extends past that of serving only as a private judge.” Christopher Honeyman &
Ellen A. Waldman, San Diego Moveable East: Competition in Cooperation-
Building, 5 CARDOZO J. CONFLICT RESOL. 173, 185 (2004).
182. Scherk v. Alberto-Culver Co., 417 U.S. 506, 519 (1974).
183. Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508 (1947).

46 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
The site of ad-hoc arbitration will most often be the arbitrator’s office,
the office of one of the parties, or a rented conference room. 184
Given the nature of the arbitration process, additional factors should
be taken into consideration in determining the most convenient location
for an arbitration, including neutrality, formality, and cost. Because the
parties may choose any convenient place, neutrality of the situs of the
arbitration can be at issue. Some advocates prefer that the hearing
always be held in a neutral place. To other advocates, neutrality of place
is not important, as long as the location is convenient to all parties. Cost
is an important consideration, keeping in mind that the purpose of
arbitration is to reduce the time and cost spent on resolving the
dispute. 185 To reduce time and travel expenses, parties can choose a
forum that is close to the parties. If the parties rent a conference room in
a hotel, they will split the cost of the room unless the contract specifies
something different. Formality can be an issue. The environment should
be conducive to a dignified arbitration hearing; there is a danger if the
place is too informal. For example, “arbitrations held in hotel rooms,
offices, union halls, or other places associated with non-judicial business
can increase the likelihood that the proceeding will degenerate from a
true hearing into a free form meeting.” 186
Generally, parties to a dispute are responsible for deciding on a
location that is acceptable to both parties. As an alternative, parties may
choose to have the arbitration administered by an agency, such as the
AAA; in which case, a Case Manager will be assigned to the arbitration
proceedings and will talk with the parties and reach a decision as to the
location, time, and date of the arbitration hearing. 187 Factors the AAA
184. Glen Spencer, Administered vs. Non-administered Arbitration, 54 DISP.
RESOL. J. 42, 46 (Feb. 1999). In ad-hoc arbitration:
[T]he arbitrator’s offices are most commonly used. Sometimes, hotel
conference rooms are rented for the hearing when no other option exists.
From time to time, parties complain that the arbitrator conducts too much
other business during the hearing day, thus delaying the proceedings. The
likelihood of this happening is highest if the arbitrator is hosting the
hearing at his or her office.
Id.
185. Edward A. Purcell, Jr., Geography as a Litigation Weapon: Consumers,
Forum-Selection Clauses, and the Rehnquist Court, 40 UCLA L. REV. 423, 445-49
(1992).
186. Hart & Wolf, supra note 107, at 1441.
187. Michael D. Young, Endispute Rules and Procedures, in LITIGATION 1993,
at 241, 245 (PLI Litig. & Admin. Practice, Course Handbook Series No. H4-5177,

2006] ARBITRATION: THE BASICS 47
considers important in determining an appropriate place for an arbitration
proceeding include:
(1) [T]he convenience of the location (e.g., availability of
witnesses, local counsel, transportation, hotels, meeting facilities,
court reporters, etc.); (2) the available pool of qualified arbitrators
within the geographical area; and (3) the applicable procedural
and substantive law. Of particular importance in international
cases is the applicability of a convention providing for recognition
and enforcement of arbitral agreements and awards and the
arbitration regime at the chosen site. 188
B. Marking Exhibits and Other Preliminary Matters
Because arbitration is intended to be less formal than litigation, the
Federal Rules of Evidence and the Federal Rules of Civil Procedure
applicable in a trial do not apply; unless, of course, the parties agree they
should apply. It is typical for the advocates to come to the hearing with
exhibits for the arbitration hearing. It is efficient to pre-mark the exhibits
in advance. For example, the claimant’s exhibits may be marked C1-
C20, while the respondent’s exhibits may be marked R1-R12. Before the
hearing, the parties should agree on joint exhibits, J1-J5. The premarking
of exhibits and the agreement on joint exhibits makes the
hearing more efficient, a key objective in arbitration. Once the hearing
begins, proper foundation should be laid, after which the advocate should
1993).
188. AAA, Drafting Arbitration Clauses, supra note 45. Without recognition of
an award in an international jurisdiction, the award obviously can not be enforced.
International recognition and enforcement are facilitated by the United Nations
Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New
York Convention):
[The Convention] was prepared and entered into force in 1959. As of October
1994, ratifications and accessions to the New York Convention totaled 101
countries. The New York Convention provides for mutual recognition and
enforcement of arbitral awards by contracting states, and limits the defenses that
may be raised in opposition to the confirmation of an award, in an attempt to
eliminate duplicative litigation following an arbitration. The New York
Convention applies to awards made in the territory of a state other than the state in
which the recognition and enforcement of the award is sought, as well as to
“arbitral awards not considered as domestic awards in the state where the
recognition and enforcement are sought.”
Slate, supra note 122, at 44.

48 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
offer the exhibit into evidence. 189
C. The Evidence
Arbitrators typically are not bound by State or Federal Rules of
Evidence. 190 Fundamental Fairness (Due Process) 191 requires that parties
be afforded the opportunity to present evidence 192 and defenses. 193 The
evidence at an arbitration hearing consists of testimony, paper exhibits,
the contract (with the arbitration clause), and real evidence, such as
examples of the shoddy merchandise. “Arbitrators are not bound to hear
all the evidence tendered by the parties; they need only afford each party
the opportunity to present their arguments and evidence.” 194 But the best
practice is to allow the parties to present the evidence they think is
important. 195
The arbitrator judges on the “weight and materiality of documentary
evidence.” 196 Because an arbitrator need not admit all evidence
presented by the parties, an arbitrator may exclude repetitious,
defamatory, or irrelevant evidence. The arbitrator may exclude hearsay
(e.g., “he said, that she said, that he said”) evidence upon objection of the
other side. Some arbitrators will permit all evidence “for what it’s
worth.” Because of Section 10 of the FAA, arbitrators will typically
189. David Crystal II, Anatomy of an Arbitration Case, in SECURITIES
ARBITRATION 1996, at 337, 362 (PLI Corporate Law, Course Handbook Series No.
B4-7147, 1996).
190. AAA Rules, supra note 37, R-31.
191. See AAA, Due Process Protocol, supra note 42. Arbitration due process in
the labor and employment setting is also now described as “industrial due process.”
See Sprewell v. Golden State Warriors, 266 F.3d 979 (9th Cir. 2001) (requiring
“industrial due process”); ELKOURI & ELKOURI, supra note 35, at 967 (stating
“arbitrators have fashioned an ‘industrial due process’ doctrine” in dealing
discipline and discharge cases).
192. Morgan v. United States, 304 U.S. 1, 18 (1938) (stating that “[t]he right to a
hearing embraces . . . the right to present evidence”).
193. Am. Sur. Co. v. Baldwin, 287 U.S. 156, 168 (1932) (recognizing that “[d]ue
process requires that there be an opportunity to present every available defense”).
194. Terk Techs. Corp. v. Dockery, 86 F. Supp. 2d 706, 709 (E.D. Mich. 2000).
195. 9 U.S.C. § 10(a)(3). Awards may be vacated “where the arbitrators were
guilty of misconduct in refusing to postpone the hearing, upon sufficient cause
shown, or in refusing to hear evidence pertinent and material to the controversy; or
of any other misbehavior by which the rights of any party have been prejudiced.”
Id.
196. Kent B. Scott, Arbitration Advocacy Part Two: The Arbitration Hearing,
15-NOV UTAH B.J. 20, 21 (2002); see also Hart & Wolf, supra note 107, at 1448-
49.

2006] ARBITRATION: THE BASICS 49
accept whatever evidence the parties think is necessary to prove their
case. 197
D. Theory of the Case
The “theory of the case” is an appealing story of what really
happened. The theory of the case should be one or two sentences, which
encapsulate the essence of the case. It must grab the attention of the
arbitrator, so that the arbitrator wants to award the advocate the decision
as soon as it is spoken. The theory of the case is a “sound bite” which
appeals to the listener. It is the architecture of the case. It takes all the
facts of the case and uses them, the good with the bad, to construct an
appealing work of art. Think of the theory of the case like the work of an
architect. You have a given set of facts to build an appealing edifice.
You must use the good bricks (facts) and the bad bricks (facts) to wind
up with a visually appealing building. Your theory of the case should
incorporate all the facts. “What really happened.” It is your version of
what happened. Start by listing the good facts (left side) and the bad
facts (right side) on a sheet of paper. Draw a line across the top and think
of a one or two sentence theory which incorporates all of them. Write
the theory across the top of the facts. It should be pithy, appealing, and
rhetorical. Here is an example: “This case is about a good employee
who lost his job because someone wrote an anonymous letter saying he
was blind. Yet his own eye doctor says he can do the job.” Its not about
“disability discrimination,” it is about a person. The case is about “a
good worker who did and can do the job.” The theory and theme should
be emotionally compelling. 198 You should present a “theory of the case”
in every arbitration proceeding: “[The theory of the case] must seize the
moral ground by showing that your client is the ‘good guy’ that needs
and deserves the [arbitrator’s] help.” 199 The more attractive and realistic
theory, the one that fits the actual evidence, the more likely it is that the
arbitrator will adopt your story as what really happened. The theory of
the case is the driving point of the case. It determines the questions you
ask on direct and cross examination. Each witness is used to obtain
evidence which supports your theory of the case. Even on cross
examination, the opponent’s witnesses are used to get from them, to the
197. Hart & Wolf, supra note 107, at 1448.
198. THOMAS A. MAUET, TRIAL TECHNIQUES 509 (Aspen Law & Bus., 6th ed.
2002).
199. THOMAS A. MAUET, TRIALS 8 (Aspen Publishers 2005).

50 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
extent possible, evidence which supports the theory of your case. The
opening and closing arguments apply the facts to your theory of the case.
E. Opening Statement
It is traditional for the advocates in an arbitration hearing to make
opening statements. Opening statements should explain the “theory of
the case” and give an overview of what the advocate will do. Who goes
first—the claimant or the respondent? The rule of thumb is—whoever
carries the burden of proof goes first in the opening statement and last in
the closing statement. 200 The opening statement should educate the
arbitrator as to the applicable law, alert him/her to the claimant and the
respondent, and summarize the dispute. 201 Parties should refrain from
absolutes; instead, general terms are most appropriate. 202 The theory of
the case should be explained in the opening, and the evidence which
supports the theory should be emphasized. Remember, the arbitrator is
most open at the beginning of the case. Do not waive an opening
statement. “Primacy” is also important. A case can be won in the
opening if it is done effectively. 203 The arbitrator may be moved toward
the claimant’s or the respondent’s side at the very beginning of the
arbitration hearing; it may be hard to move the arbitrator back from that
point. Think of the opening as a first chance to convince the arbitrator
that the advocate’s side of the case is most compelling. In fact, the
opening should be a somewhat less argumentative form of the closing,
with the intention of convincing the arbitrator at the start of the case.
Remember, the arbitration, while not a trial, is still an adversarial
hearing. Only one side will win.
F. Burden of Proof
In the United States, the burden of proof is carried by the
200. Marvin F. Hill, Jr. & Anthony V. Sinicropi, Improving the Arbitration
Process: A Primer For Advocates, 27 WILLAMETTE L. REV. 463, 480-81 (Summer
1991).
201. Theodore A. Krebsbach, Openings, Summations and Legal Briefs:
Techniques and Strategies, in SECURITIES ARBITRATION 1994, at 531, 535-56 (PLI
Corporate Law Practice, Course Handbook Series No. B-7072, 1994).
202. Id. at 538-39.
203. See John J. Eannance, An Art—Not a Science: A Criminal Lawyers
Perspective on Opening, NBA MAG., November/December, 1997, at 41
(commenting that studies indicate that in 80% of jury trials, the party who is favored
by the jury after opening statements wins).

2006] ARBITRATION: THE BASICS 51
plaintiff/claimant in three different ways:
1. Proof by a preponderance of the evidence;
2. Proof by clear and convincing evidence;
3. Proof beyond a reasonable doubt.
In arbitration, the person who is claiming a violation of the contract
usually carries the burden of proof. The claimant must convince the
arbitrator by either a preponderance of the evidence or by clear and
convincing evidence that the other side has breached the contract. Most
arbitrators will use the preponderance of the evidence as the burden of
proof required. 204 Some arbitrators will hold that, if the loss the claimant
faces, e.g., loss of a job, is great, or the conduct charged is a crime, the
employer must meet a higher burden of proof, i.e., clear and convincing
evidence, or even beyond a reasonable doubt. 205
In arbitration, the burden of proof is thought to consist of “two
separate components: (1) the initial burden of going forward with the
evidence; and (2) the burden of persuading the trier of fact concerning
the ultimate resolution of some fact or issue. In both instances, the
burden may depend upon the nature of the issue, the specific contract
provision, or a usage established by the parties.” 206
The burden of proof and the party carrying the burden may vary
depending upon the nature of the breach. Some arbitrators require clear
and convincing evidence if the result of the breach of contract is
dramatic. For example, in a labor arbitration, if the worker has lost his or
her job and is claiming that the employer violated a union contract by not
having “just cause” to terminate, the burden of proof will rest with the
employer to prove by clear and convincing evidence that it had just cause
to terminate the employee. In this case, the burden is switched to the
employer even though the employee is claiming a violation of the
contract. The employer has the burden to prove the positive—that the
employer had just cause to terminate the employee, rather than the
employee having the burden to prove the negative—that the employer
did not have just cause.
204. Deborah J. Crumb & Kenneth Jennings, Resolving Cases of Patient Abuse
in Health-Care Facilities, 53 DISP. RESOL. J. 36, 39-40 (Feb. 1998).
205. ELKOURI & ELKOURI, supra note 35, at 949-52.
206. Hill & Sinicropi, supra note 200, at 491.

52 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
G. Swearing the Witnesses
It is traditional for witnesses to take an oath promising they will tell
the truth, the whole truth and nothing but the truth. Rule 27 of the
American Arbitration Association Rules of Commercial Arbitration
states, “[t]he arbitrator may require witnesses to testify under oath
administered by any duly qualified person and, if it is required by law or
requested by any party, shall do so.” 207 The Uniform Arbitration Act
gives arbitrators in the states authority to administer such oaths. 208 The
witness is asked to swear or affirm under the penalty of perjury that what
he or she says is true. If a witness lies, the arbitrator does not have the
authority to prosecute the witness, but the arbitrator can present the
evidence to the prosecuting authorities if the arbitrator thinks the witness
has perjured himself. 209
H. Out of Sequence Witnesses
It is not uncommon in arbitration hearings for the advocates to call
witnesses as they wish for the sake of convenience. Arbitration is much
more flexible than a trial, so it is common to permit out of sequence
witnesses to testify with the arbitrator’s approval. Sometimes a witness
is only available at a certain time. So, for example, even though the
claimant has not put in his or her case-in-chief through all his witnesses,
the respondent may ask to call a witness because it is the only time the
witness is available.
I. Direct Examination
Whoever carries the burden of proof calls the first witness. The
207. AAA Rules, supra note 37, R-25.
208. UNIFORM ARBITRATION ACT § 17(a), as amended 2000, 7 U.L.A. 36 (Supp.
2004).
209. Brian N. Smiley, The Law and Ethics of Witness Preparation, in SECURITIES
ARBITRATION 1998, at 659, 669-70 (PLI Corporate Law Practice, Course Handbook
Series No. B0-001K, 1998) (recognizing that “[a]rbitrations are not considered
federal proceedings under the federal perjury statutes. Nonetheless, since testimony
is taken under oath, arbitration testimony may be covered by state perjury statutes,
and false evidence in arbitrations can result in prosecution under other federal
acts”); see United States v. Coyle, No. 1S 93 Cr. 68 (SS), 1993 WL 378332, at *1
(S.D.N.Y. Sept. 17, 1993) (unreported case) (involving a case charging defendant
“with engaging in a conspiracy to deprive [plaintiff] of her right to recover
moneys . . . in the course of her arbitration proceeding through the use of a forged
document and perjurious testimony”).

2006] ARBITRATION: THE BASICS 53
witness is sworn and asked a series of questions. Direct examination
questions are usually wide open questions starting with “who,” “what,”
“when,” “where,” “how,” and “why.” For example: “Where were you?”
“What happened that day?” “Why did you file for arbitration?” The
focus is on the witness during direct exam. The focus should not be on
the advocate who is asking the short questions. The witness should be
making the music. The advocate is simply asking the questions so the
evidence can come in through the witness. The objective is for the
witness to explain on direct examination through questions what
happened. The advocate is the conductor but the witness is the musician.
J. Use of Visuals
“Ours is the age of visual media.” 210 Social science research
supports the shift from auditory to visual in learning and retention. 211
“Show and tell” also works with arbitrators. In every arbitration, there
are one or two critical exhibits: language from the contract, a location,
and a physical object. The exhibit can become the center of attention.
Diagrams, models, maps, drawings and demonstrations by witnesses,
computer-generated graphics and three dimensional simulations can be
worth a thousand words. They can be powerful. “[S]tudies confirm that
if information is presented through multiple ‘channels’—aural, written,
and visual—understanding and memory are again substantially
improved. In short, visual exhibits are important not only in presenting
new information in an attractive, memorable way, but also in
highlighting and summarizing information already presented through
another medium.” 212
K. Cross Examination
Once the witness has finished on direct examination, the opposing
advocate has an opportunity to cross examine the witness. Crossexamination
“is the greatest engine ever invented for the discovery of
truth,” proclaims Professor Irving Younger. 213 Cross-examination is
designed to elicit information from the witness which supports the theory
of your case; and to attack and weaken the other party’s case and the
210. MAUET, supra note 198, at 167.
211. Id.
212. Id.
213. IRVING R. YOUNGER, AN IRREVERENT INTRODUCTION TO HEARSAY 2 (ABA
1977).

54 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
credibility of the other party. 214 Usually the cross-examiner is eliciting
information from the witness which supports the theory of the crossexaminer’s
case.
Cross examination questions should be closed, controlled questions
in which the advocate is seeking a “yes” or “no” answer. For example,
“You signed the contract, didn’t you?” “You understood you were
obligating yourself and your company when you signed the contract?”
“You did not make the list of reasons until after you terminated the
contract, did you?” Sometimes the cross-examiner might ask a wideopen
question like “why.” The best practice in arbitration, however, is
for the cross-examiner to ask a series of controlled questions to bring out
the specific and precise points through the witness that he or she wishes
to highlight. Typically, don’t ask “why” or “how” or other direct
examination questions. Ask questions which take from the witness, to
the extent possible, all the facts the witness has which support the cross
examiner’s theory of the case. On cross examination highlight the
information the witness has which supports the examiners theory of the
case. It is important when an advocate cross examines a witness, the
advocate is absolutely sure as to what his or her theory of the case is.
“For maximum effect, the questions on cross-examination should be
crisp and short . . . [S]hort pauses can focus [the arbitrator’s] attention on
the questions and answers more fully than if the cross-examination
questions are fired at the witness in rapid succession.” 215 Be very civil.
Ask questions in a calm, respectful manner. Do not attack the witness.
If the witness being cross examined does not answer the question you
just asked, simply blame yourself in the way you asked the question and
ask it exactly the same way only more gently. “I am sorry if I asked the
question so you did not understand it, you read this contract when you
signed it, didn’t you?”
L. Redirect Examination
Once cross examination is finished, the advocate who originally
called the witness has an opportunity for redirect examination to clarify
any points the advocate wishes, which were brought out on cross-
214. Rt. Hon. Lord Mackay, The Advocate: Should He Speak or Write?, 60
FORDHAM L. REV. 953, 959-60 (1992).
215. David E. Robbins, Discovery and Hearing Presentation Techniques, in
SECURITIES ARBITRATION 1992, at 545, 578 (PLI Corporate Law Practice, Course
Handbook Series No. B4-7006, 1992) (quoting CRAIG A. PETERSON & CLAIRE
MCCARTHY, ARBITRATION STRATEGY AND TECHNIQUE (1986)).

2006] ARBITRATION: THE BASICS 55
examination. The redirect examination should only address what was
brought out in cross-examination. The redirect examination is not
intended to be a restatement of the direct examination. The goal is to
narrow the scope of the witness’ testimony.
M. Re-Cross Examination
Once the redirect examination is finished, the opposing lawyer has
an opportunity to re-cross examine the witness. Again, the re-cross
examination is intended to be very narrow. It is intended to be limited to
only those issues that were raised on redirect examination.
N. Hyper-Aggressive Advocates
It is with the right combination of reason and emotion that an
advocate can be most effective. 216 “Many opinions have been expressed
from time to time about the character of the highest advocacy and the
highest oratory. It would seem to be the view of those best qualified to
judge that simplicity of speech, linked with the expression of the deepest
feelings of mankind, has always had the power to stir men’s blood in all
ages of the world’s history.” 217 For this reason, in arbitration, the hyperaggressive
advocate is less effective than the advocate who is civil.
Civility is essential for the effective and efficient operation of an
arbitration hearing. Some advocates do not recognize the value of
civility as an effective advocacy tool and display excessive aggression
that disrupts the arbitration hearing. For example, some advocates use
hyper-aggressive methods in their questioning. “If you weren’t lying,
you would know, wouldn’t you, that the light was green?” The other
advocate is offended and attacks the behavior in words, tone, and anger.
In an attempt to control such aggression from both sides, one method
used by experienced arbitrators is to take a break and ask to speak to the
advocates. Out of the hearing of the parties and witnesses, the arbitrator
may simply tell the hyper-aggressive advocate that he/she is making a
bad impression on the arbitrator, the decision-maker. The arbitrator can
repeat back to the advocate what he/she said, and tell the advocate that, if
the advocate is doing this to impress the client, then the arbitrator
understands. But if the advocate is doing this to impress the arbitrator, it
216. John C. Shephard & Jordan Cherrick, Advocacy and Emotion, 138 F.R.D.
619, 619 (1991).
217. Id. at 620 (quoting NORMAN BIRKETT, SIX GREAT ADVOCATES 109-10
(Penguin Books 1961)).

56 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
is not working. An arbitrator may deal with the situation by simply
refraining from taking notes when the hyper-aggressive advocate
continues the behavior. If the hyper-aggressive advocate is acting in
such a fashion to impress his or her client, so be it. It is important to
remember that such aggression will not help the aggressive party’s case
and, more often than not, be detrimental.
O. Closing Arguments versus Post-Hearing Briefs
As stated by Francis Bacon, “[r]eading maketh a full man;
conference a ready man; and writing an exact man.” 218 In traditional
arbitration hearings in the United States, the parties choose either oral
closing arguments or post-hearing briefs. In deciding between a closing
argument and a post-hearing brief, the parties should consider the nature
of the dispute and the benefits of using one form over the other.
A closing argument allows the advocates to summarize the
evidence, apply the evidence to the theory of the case, and argue the
result the advocate thinks the arbitrator should reach. The parties may
prefer an oral closing argument because of the time and cost involved in
preparing a post-hearing brief; plus the postponement of the decision as a
result of the extra time required to prepare a brief. 219 A post-hearing
brief may be helpful in dealing with complicated cases which have lasted
for more than several days. 220 Post-hearing briefs are useful because
they allow the advocates to summarize the evidence in writing and argue
their respective positions. Post-hearing briefs allow the advocates to
research and cite relevant arbitration precedent and court cases, if
applicable.
218. Mackay, supra note 214, at 954.
219. See Federal Mediation and Conciliation Service, Arbitration Statistics
Fiscal Year 2004, Oct. 5, 2004, available at http://www.fmcs.gov/assets/files/Avera
geDays.doc (last visited Dec. 8, 2005). The average time for submitting a posthearing
brief has increased from 31.0 days in fiscal 1990 to 65.31 days in fiscal
2004. Id. Despite the increased time and cost associated with submitting a brief,
the Federal Mediation and Conciliation Service “Arbitration Statistics Fiscal 2004”
reports that briefs were filed in 2,094 of 2,581 cases, or in 81.1% of the cases. See
Federal Mediation and Conciliation Service, Arbitration Statistics Fiscal Year 2004,
Oct. 5, 2004, available at http://www.fmcs.gov/assets/files/IssesBriefsTranscriptsW
aivers.doc (last visited Dec. 8, 2005).
220. NOLAN, supra note 3, at 32.

2006] ARBITRATION: THE BASICS 57
VIII. THE DECISION
A. Use of the Contract, the Law, and Public Policy
Arbitrators have great latitude when rendering a decision and can
decide cases based on their own subjective notions of justice and equity,
disregarding substantive law. 221 It is argued that arbitrators should base
their decision on the four corners of the contract. 222 In some
circumstances, however, arbitrators might want to take into account
substantive law and public policy in making determinations. 223
Arbitrators who favor the contract as the basis of the decision view the
221. See, e.g., Hill v. Cloud, 648 So. 2d 1383, 1389 (2d Cir. 1995) (quoting
Commercial Arbitration Rules of the American Arbitration Association) (stating that
“[t]he arbitrator may grant any remedy or relief that the arbitrator deems just and
equitable and within the scope of the agreement of the parties”).
222. See Peoples Sec. Life Ins. Co. v. Monumental Life Ins. Co., 991 F.2d 141,
147 (4th Cir. 1993) (quoting Upshur Coals Corp. v. United Mine Workers, Dist. 31,
933 F.2d 225, 226-28 (4th Cir.1991)) (stating that, “[a]lthough we may disagree
with an arbitrator’s interpretation of a contract, we must uphold it as long as it
‘draws its essence from the agreement’”); In re Copaz Packing Corp., 105 LA 1074
(Feldman 1995):
“[T]he language of the four corners of the agreement are generally the only
language that can be dealt with when an arbitrator determines the result in a labor
arbitration matter. There are a few exceptions to that general rule but those
exceptions do not apply in this particular case. The language of the contract of
collective bargaining revealed the wages to be paid to a group of individuals who
have already reached the applicable base labor rate and a wage will be paid to job
entry personnel. Wages are a creature of the contract. In other words, evidence
outside the four corners of the agreement, unless it is specifically referred in the
contract do not control the meanings and statements within the four corners of the
agreement.”
Id.
223. See Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (1991)
(quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614,
628 (1985)) (stating that, “[b]y agreeing to arbitrate a statutory claim, a party does
not forgo the substantive rights afforded by the statute; it only submits to their
resolution in an arbitral, rather than a judicial, forum”); In re Cargill, Inc., 117 LA
214 (Feldman 2002):
Under the modem evolution of that, has come findings that show that outside law
may be engrafted upon a contract of collective bargaining whether that collective
bargaining contract contains such language or not of placing that outside law within
the terms and meanings of the four corners of the contract.
Id. (holding the Federal Mine Safety and Health Act of 1977 would be engrafted
onto contract).

58 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
contract as the source from which arbitrators receive their authority. 224
They reason that only the contract is significant and that neither the law
nor public policy should be of concern to an arbitrator. These arbitrators
assert that unless the contract calls for the application of a specific law
and/or the accounting of public policy, only the contract matters.
On the other hand, there are arbitrators who contend that law and
public policy are implied in any contract. 225 Such arbitrators argue that
the parties choose them because of their training in the law and their
understanding of public policy. Consequently, the interpretation of any
contract will always be within the context of law and public policy. “A
court’s refusal to enforce an arbitrator’s award under a collectivebargaining
agreement because it is contrary to public policy is a specific
application of the more general doctrine, rooted in the common law, that
a court may refuse to enforce contracts that violate law or public
policy.” 226 “Such a public policy, however, must be well defined and
dominant, and is to be ascertained ‘by reference to the laws and legal
precedents and not from general considerations of supposed public
interests.’” 227
B. The Requirement of a Reasoned Decision
Arbitrators usually submit written awards. Some arbitration awards
do not require findings of fact or conclusions of law. 228 Labor
224. United Steelworkers of Am. v. Enter. Wheel & Car Corp., 363 U.S. 593,
597 (1960) (stating that an arbitrator “may of course look for guidance from many
sources, yet his award is legitimate only so long as it draws its essence from the
collective bargaining agreement”).
225. United Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S.
574, 581-82 (1960) (stating that “[t]he labor arbitrator’s source of law is not
confined to the express provisions of the contract, as the industrial common law—
the practices of the industry and the shop—is equally a part of the collective
bargaining agreement although not expressed in it”).
226. United Paperworkers Int’l Union Inc. v. Misco Inc., 484 U.S. 29, 42 (1987)
(citing W.R. Grace & Co. v. Rubber Workers, 461 U.S. 757, 766, (1983); Hurd v.
Hodge, 334 U.S. 24, 34-35, (1948)).
227. W.R. Grace & Co. v. Rubber Workers, 461 U.S. 757, 766, (1983) (citing
Muschany v. United States, 324 U.S. 49, 66 (1945).
228. A.G. Edwards & Sons, Inc. v. McCollough, 967 F.2d 1401, 1403 (9th Cir.
1992) (holding that “arbitrators are not required to state the reasons for their
decisions”); Escobar v. Shearson Lehman Hutton, Inc., 762 F. Supp. 461, 463
(D.P.R. 1991) (stating that “arbitrators are not required to disclose the basis on
which their awards are made”); Cobec Brazilian Trading & Warehousing Corp. of
United States v. Isbrandtsen, 524 F. Supp. 7, 9 (S.D.N.Y. 1980).

2006] ARBITRATION: THE BASICS 59
Arbitration Awards and International Commercial Arbitration Awards are
fully reasoned awards with findings of fact, conclusions of law, and
rationale for the final award. There are three general kinds of Arbitration
Awards;
1. A simple decision;
2. A decision with limited findings of fact and conclusions;
3. A fully reasoned decision with contentions of the parties,
findings of fact, and decision and rationale.
A simple decision need only set out the basic information such as
which party prevails and how much money is awarded. A simple award
is quick, efficient, and saves time and money. And the dispute is settled.
A fully reasoned decision, on the other hand, delineates the contentions
of both parties, findings of fact by the arbitrator, and a decision and
rationale for that decision. A written, reasoned decision takes
considerably more time and effort. It is common for a Labor Arbitration
Award in the United States to be ten to fifteen pages long, sometimes
longer. An International Commercial Arbitration Award can be upward
of one hundred pages.
The determination to provide a fully reasoned decision is based on
tradition that has developed in certain arbitration contexts.
Considerations of efficiency, cost, and importance of the decision weigh
into whether a reasoned decision is used.
The nature of the case is one factor arbitrators use in determining the
sort of decision to award. The FMCS provides that non-reasoned, or
“expedited,” decisions “may be appropriate in certain non-precedential
cases or those that do not involve complex or unique issues.” 229
Arbitration decisions in national commercial arbitrations, insurance
arbitrations, and sports arbitrations, are usually simple decisions with
very limited explanations. But fully reasoned decisions are expected in
arbitrations involving labor and international commercial disputes.
The amount of money involved is not the primary consideration in
determining which type of written award an arbitrator will issue. It is not
unusual to see non-reasoned decisions even when the dispute involves
large amounts of money. Time, efficiency, the expectation of the parties,
the expectation of the administrative agency, the precedential value of
229. Federal Mediation and Conciliation Service, supra note 132, § 1404.17.

60 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
the decision, and the ability of the court to review a decision all are
considerations for the kind of written award issued by an arbitrator. An
arbitration award which fails to state the basis for the award cannot serve
as precedent. 230 An award is beyond a court’s ability to review if the
arbitrator does not state the basis for his/her award. 231 One concern is
“written opinions might open avenues for attack on the award by the
losing party.” 232 So, common wisdom in the world of arbitration is the
“less said the better.” 233
C. Procedural Requirements for a Decision
The AAA sets forth certain procedural rules that are to be followed
by the arbitrators in making their award. The rule states:
The award must be signed by the arbitrators and, under the laws of
some states, be notarized or witnessed. If two or more arbitrators are
involved, the award must have the signatures of a majority.
Arbitrators usually meet after the last hearing to agree on the award.
They might disagree on some points. Their conversations should be
kept confidential. No arbitrator should disclose what any other
member of the panel said during these conferences. The majority
rules, but any arbitrator who disagrees may note a dissent on the
award form or elect not to sign the award. 234
D. Sending the Decision to Reporting Bodies
Arbitration decisions do not have precedential value. 235 They are
230. See Peoples Sec. Life Ins. Co. v. Monumental Life Ins. Co., 991 F.2d 141,
147 (4th Cir. 1993).
231. Reichman v. Creative Real Estate Consultants, 476 F. Supp. 1276, 1282
(D.C.N.Y. 1979) (stating that “the task of a reviewing court, especially one
confronted by a claim of manifest disregard of the law, is made more difficult in
cases where no reasons are given by the arbitrator”).
232. American Arbitration Association, A Guide for Commercial Arbitrators
(2004), available at http://www.adr.org/sp.asp?id=22016 (last visited Dec. 8, 2005).
233. Herbert L. Marx Jr., Who Are Labor Arbitration Opinions Written For? And
Other Musings About Award Writing, 58 DISP. RESOL. J. 22, 23 (2003).
234. American Arbitration Association, supra note 232.
235. Peoples Sec. Life Ins. Co., 991 F.2d at 147 (stating that “arbitration awards
have no precedential value”). While arbitration awards theoretically have no
precedential value because of the sui generis nature of arbitration, some are
nonetheless published, with a resulting impact on future arbitral proceedings. For a
discussion of the pros and cons of published awards, see ELKOURI & ELKOURI,
supra note 35, at 568-73.

2006] ARBITRATION: THE BASICS 61
“sui generis.” 236 Yet published decisions are useful. A published
decision can provide insight into the factual, legal, and decision-making
reasoning of the arbitrator. Arbitrators with similar cases can use the
rationale to assist in the determination of the present case. So, in fact,
they do have persuasive value. Reporting bodies, such as the Bureau of
National Affairs, 237 the Commerce Clearing House, 238 the AAA, 239 and
many state agencies publish arbitration decisions with names of the
parties redacted to assist advocates and arbitrators in understanding the
development of the body of arbitrable law. While arbitration decisions
do not set precedent, they are nevertheless useful in understanding how
arbitrators determine disputes such as past practice, discipline, contract
interpretation, and arbitrability. It is not unusual for arbitrators in labor
disputes to cite other arbitration decisions in their awards. 240
E. Ability to Appeal an Arbitration Decision
It is very difficult to get a court to overturn an arbitration decision.
Arbitration decisions are regarded as final and binding. 241 Courts are
reluctant to review the merits of an arbitration award. 242 Parties do,
however, have limited ability to appeal to a court to vacate an arbitrator’s
decision. Some agencies even allow a second arbitration panel as a
236. Amalgamated Meat Cutters v. Neuhoff Bros. Packers, Inc., 481 F.2d 817,
820 (5th Cir. 1973) (citing Washington-Baltimore Newspaper Guild, Local 35 v.
Washington Post Co., 442 F.2d 1234, 1238 (D.C. Cir. 1971) (holding “we are
obliged to recognize that arbitration proceedings are sui generis”).
237. The Bureau of National Affairs, Inc. publishes labor arbitration awards in
the Labor Arbitration Reporter ® . See http://www.bna.com/products/labor/lelw.htm
(2005).
238. The Commerce Clearing House publishes securities arbitration awards, see
http://scan.cch.com/ (2005), and labor arbitration awards, see http://hr.cch.com/
(2005).
239. The AAA maintains databases of arbitration awards it issues. See
http://www.adr.org/AAAawards/ (2005).
240. NCR Corp., E & M-Wichita v. Int’l Ass’n of Machinists & Aerospace
Workers, Dist., 906 F.2d 1499, 1505 (10th Cir. 1990) (recognizing that arbitrator, in
interpreting a contract, may look to “the negotiating and contractual history of the
parties, past practices, the common law of the shop, and a number of arbitration,
NLRB, and judicial decisions providing definition to the key terms”).
241. Hill & Sinicropi, supra note 200, at 472.
242. United Steelworkers of Am. v. Enter. Wheel & Car Corp., 363 U.S. 593,
596 (1960) (recognizing that “[t]he federal policy of settling labor disputes by
arbitration would be undermined if courts had the final say on the merits of the
awards”).

62 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
method to appeal an arbitration decision. For example, the AAA outlines
this interesting appeals process:
Within 30 days of receipt of any award (which shall not be binding if
an appeal is taken), any party may notify the AAA of an intention to
appeal to a second arbitral tribunal, constituted in the same manner as
the initial tribunal. The appeal tribunal shall be entitled to adopt the
initial award as its own, modify the initial award or substitute its own
award for the initial award. The appeal tribunal shall not modify or
replace the initial award except [for manifest disregard of law or
facts] [for clear errors of law or because of clear and convincing
factual errors]. The award of the appeal tribunal shall be final and
binding, and judgment may be entered by a court having jurisdiction
thereof. 243
Even when a court decides to review an arbitration award, its legal
right to review the arbitration decision is very limited. 244 Dissatisfaction
with the amount is not grounds to vacate an award. 245 Judicial review is
substantially limited. Section 10 of the FAA lists four grounds for a
court to vacate an arbitration award: (1) corruption, fraud, or undue
means was employed in reaching the award; (2) partiality or corruption
exhibited by arbitrators; 246 (3) refusing to postpone the hearing upon
sufficient cause; (4) arbitrators exceeded their powers. 247
In vacating an award, a court can rely on several doctrines: manifest
disregard of the law, unconscionability, and public policy. “Manifest
disregard” of the law is a high standard. It requires a showing that the
arbitrator knew and understood the law but chose to not apply it. 248
243. AAA, Drafting Dispute Resolution Clauses, supra note 45.
244. See, e.g., French v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 784 F.2d
902, 906 (9th Cir. 1986) (quoting Swift Indus., Inc. v. Botany Indus., Inc., 466 F.2d
1125, 1131 (3d Cir. 1972) (holding that “[a]n arbitrator’s decision must be upheld
unless it is ‘completely irrational’”).
245. Biscanin v Merrill Lynch & Co., Inc., 407 F. 3d 905, 907 (8th Cir. 2005).
246. One test that has been proposed for evaluating an arbitrator’s bias includes a
reasonable person standard. If a reasonable person would conclude that the
arbitrator was partial, then the arbitral award may be vacated. No actual bias must
be shown under this standard. However, bias must be “direct, definite, and capable
of demonstration, not remote, uncertain or speculative.” Lisa B. Bingham, On
Repeat Players, Adhesive Contracts, and the Use of Statistics in Judicial Review of
Employment Arbitration Awards, 29 MCGEORGE L. REV. 223, 248 (1998).
247. 9 U.S.C. § 10(a)(1)-(4) (2004).
248. Upshur Coals Corp. v. United Mine Workers of Am., 933 F.2d 225, 229
(4th Cir. 1994). The court held that an arbitrator’s interpretation of the law “may
only be overturned where it is in manifest disregard of the law.” Id. The court

2006] ARBITRATION: THE BASICS 63
“Unconscionability” can be a basis for vacating an award, 249 but even an
arbitration agreement pre-packaged in a computer box was not
unconscionable or adhesionary enough to warrant a court’s intervention
to stay the arbitration. 250 There are two categories of unconscionability:
substantive and procedural. 251 When terms are extremely favorable to
one side, the contract is said to be of substantive unconscionability. 252
“Courts have suggested . . . a large amount of one type of
unconscionability can make up for only a small amount of the other.” 253
Courts have overturned arbitration decisions on “public policy”
grounds. 254 For example, an arbitrator who returned a police officer to
his job, even though the officer had engaged in a pattern of offensive and
predatory conduct toward women for ten years, was reversed by a court
because “the arbitrator’s decision under the extreme facts of this case
violated public policy.” 255 But for a court to overturn an arbitration
decision the public policy violated must be “well defined and
elaborated further stating that “[a]n arbitration award is enforceable ‘even if the
award resulted from a misinterpretation of law, faulty legal reasoning or erroneous
legal conclusion.’” Id. (quoting George Day Constr. Co. v. United Brothers of
Carpenters Local 354, 722 F.2d 1471, 1479 (9th Cir.1984)). An arbitration decision
“may only be reversed ‘when arbitrators understand and correctly state the law, but
proceed to disregard the same.’” Id. (quoting San Martine Compañía de
Navegación, S.A. v. Saguenay Terminals Ltd., 293 F.2d 796, 801 (9th Cir. 1961)).
249. E. ALLEN FARNSWORTH, FARNSWORTH ON CONTRACTS, § 4.28, at 552-53
(Aspen Law & Bus. 1998) (citing RESTATEMENT (SECOND) OF CONTRACTS § 208).
250. Hill v Gateway 2000, Inc., 105 F.3d 1147 (7th Cir. 1997), cert. denied, 522
US 808 (1997).
251. Brower v. Gateway 2000, Inc., 676 N.Y.S.2d 569, 573 (N.Y. App. Div.
1998).
252. Id. at 574.
253. FARNSWORTH, supra note 249.
254. W.R. Grace & Co. v. Local Union 759, 461 U.S. 757, 766 (1983) (quoting
Muschany v. United States, 324 U.S. 49, 66 (1945)) (holding that to invalidate an
arbitration award on public policy grounds, “a public policy . . . must be well
defined and dominant, and is to be ascertained ‘by reference to the laws and legal
precedents and not from general considerations of supposed public interests’”). But
see E.I. DuPont de Nemours & Co. v. Grasselli Employees Indep. Ass’n of E. Chi.,
Inc., 790 F.2d 611, 618 (7th Cir. 1986) (Easterbrook , J., concurring) (expressing
the opinion that “power to set aside awards on grounds of public policy, as distinct
from rules of law, is too sweeping”). For further discussion, see Daryl Andrews,
The Public Policy Exception to Arbitral Finality: Protecting Children and
Preserving the Sanctity of Arbitration, 12 B.U. PUB. INT. L.J. 461 (2003).
255. City of Brooklyn Ctr. v. Law Enforcement Labor Servs., Inc., 635 N.W.2d
236, 244 (Minn. Ct. App. 2001), rev. denied (Minn. Ct. App. 2001).

64 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
dominant.” 256
IX. PROBLEMS WITH ARBITRATION 257
A. Adhesive Nature of the Contract
Arbitration has advanced dramatically since the enactment of the
FAA in 1925. It has now advanced to the point where some contracts
contain arbitration provisions for which the parties did not really
negotiate. These contracts are on a “take it or leave it” basis. For
example, credit card companies, including Visa, Master Card, and
Discover Card, now have arbitration clauses in their member agreements
specifying arbitration as the mechanism to resolve any claim or dispute
that arises; neither party has the right to litigate the claim in court. 258
Consumers have challenged such adhesion arbitration clauses, arguing
that they had no choice but to accept the clause because virtually all
credit card company agreements contain arbitration clauses. 259 But the
courts have refused to call these contracts of adhesion.
Arbitration clauses are increasingly being included in employment
contracts. Employees may not realize that they are waiving their right to
a trial by signing the agreement. When an offer of employment is
conditioned upon signing an employment contract with an arbitration
agreement, the employee may have no choice but to sign if he/she really
wants the job. Most courts will say this is not a contract of adhesion,
256. W.R. Grace, 461 U.S. at 766.
257. The concept for Section IX: Problems with Arbitration, came from an article
written by Scott Atlas, Chair of the Section of Litigation of the American Bar
Association. See Scott Atlas, Have You Ever Tried to Make Up Your Mind—About
Arbitration?, 29 NO. 1 LITIG. 1 (Fall 2002).
258. See, e.g., Discover Card, Discover Platinum Card Important Information,
2005, at https://www.discovercard.com/cardmembersvcs/discovercard/apply-for-a-c
ard/importantInfo?card=PLAT (last visited Dec. 8, 2005).
The Cardmember Agreement provides that we may choose to resolve a claim
relating to your Account by binding arbitration, in which case, you will not have
the right to have that claim resolved by a judge or jury. You may reject the
arbitration provision with respect to your new Account within 30 days after
receiving your Card.
Id.
259. Nefores v. Branddirect Mktg., Inc., No. 02-CA-0012, 2002 WL 31057387,
at *7 (Ohio Ct. App. 2002). Cardmember argued that “the subject arbitration clause
is unenforceable since ‘one-sided arbitration clauses forced on the consumer via an
adhesion contract are unenforceable in Ohio as against public policy.’” Id.

2006] ARBITRATION: THE BASICS 65
even though it can be argued the clause is the very definition of
“adhesion contract.” 260
B. The Problem of Neutrality
The neutrality of the arbitration proceeding is also a concern. The
manner in which arbitrators are chosen, the potential for bias on the part
of a party-appointed arbitrator, institutional bias, the “repeat player
effect,” and the potential for bias of arbitrators who sit on permanent
panels are all situations which can affect the neutrality of an arbitrator.
The Supreme Court stated that “any tribunal permitted by law to try
cases and controversies not only must be unbiased but also must avoid
even the appearance of bias.” 261 An unbiased arbitrator is critical for a
fair arbitration, especially because an arbitrator’s decision is subject to
limited review. 262
First, there is concern that the arbitrators on the agency list are not
chosen by a balanced neutral manner. 263 The choice of an arbitrator from
a pool is meaningless if the system of choosing arbitrators for the pool is
biased. 264 How does someone get on an agency’s list of approved
arbitrators? Is diversity part of the mix?
Second, arbitration proceedings involving party-appointed
arbitrators can raise questions of neutrality of the proceeding. A partyappointed
arbitrator may feel obligated to the party who chose him/her.
The arbitrator may be closely allied to the industry by experience and
training. 265 Yet this “industry bias” is permissible bias under the AAA
260. Adkins v. Labor Ready, Inc., 303 F.3d 496 (4th Cir. 2002) (citing Circuit
City Stores, Inc. v. Adams, 532 U.S. 105 (2001)). Many commentators argue that
employees should have the choice to arbitrate after a dispute has arisen. The
assumption that post-dispute arbitration agreements are better for employees
assumes that the employer would agree to arbitrate at that point. Once a dispute has
arisen, however, the employer may often see a tactical benefit from litigating the
claim. For example, if an employer knows that an employee does not have a large
enough claim to retain an attorney, the employer will not agree to arbitrate. Maltby,
supra note 8, at 43.
261. Commonwealth Coatings Corp. v. Cont’l Cas. Co., 393 U.S. 145, 150
(1968).
262. Maltby, supra note 139, at 18.
263. Id. at 21 (stating that “[b]efore a court can legitimately defer to the decision
of an arbitrator, it must know that the pool from which the arbitrator was chosen
was not biased”).
264. Id.
265. Robert D. Taichert, Why Not Provide for Neutral Party-Appointed
Arbitrators?, 57 DISP. RESOL. J. 22 (2003).

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rule. 266 Parties might favor experience in an industry over impartiality,
“Familiarity with a discipline often comes at the expense of complete
impartiality.” 267
A third concern involves institutional bias. Institutional bias refers
to a “tendency for arbitration outcomes to favor one class of participants
over another.” 268 Institutional bias is sometimes alleged in internet
domain name arbitration and in securities arbitration. 269 Institutional
bias can occur because of the “repeat player effect.” Evidence shows
that an arbitrator may render a decision in favor of an institutional client
because the arbitrator wants repeat business from the client. 270 In
employment cases, the employer may arbitrate many claims, often using
the same arbitrator. 271 On the other hand, the employee is not likely to
266. AAA, Code of Ethics, supra note 101, at Canon X (A)(1), cited in Sunkist
Soft Drinks, Inc. v. Sunkist Growers, Inc., 10 F.3d 753, 759-60 (11th Cir. 1993).
The AAA Code of Ethics provides that arbitrators “act in good faith and with
integrity and fairness.”
267. Morelite Constr. Corp. v. N.Y. City Dist. Council Carpenters Benefit Funds,
748 F.2d 79, 83 (2d Cir. 1984)
268. Roger J. Perlstadt, Timing of Institutional Bias Challenges to Arbitration, 69
U. CHI. L. REV. 1983, 1986-87 (2002).
269. Id. The Internet Corporation for Assigned Names and Numbers (ICANN)
deals with disputes over domain names. Id. Under ICANN’s dispute resolution
policy, trademark holders may institute a claim against a person who has registered
a domain name (the registrant may not bring a claim against a trademark holder).
Id. Because only four arbitration companies can administer ICANN disputes, the
companies have an incentive to find for the trademark holder to secure their repeat
business. Id. According to two studies, trademark holders prevail approximately
60% of the time in front of a panel of arbitrators and 83% of the time before a single
arbitrator who was chosen by the arbitration provider. Id. at 1987. The securities
arbitration system is often criticized, because the majority of the arbitrators are
older, white men who are former securities industry executives; however, in spite of
this criticism, there is some evidence that employees in securities arbitration fare
better than in litigation. Maltby, supra note 8, at 50.
270. Stuart H. Bompey, Michael Delikat, & Lisa K. McClelland, The Attack on
Arbitration and Mediation of Employment Disputes, 13 LAB. LAW. 21, 37 (1997);
see Bingham, supra note 246, at 234. According to one study of 270 arbitration
awards, employees bringing claims against one-time player employers win over
70% of the time. Id. When employees bring claims against repeat player
employers, the win rate drops to 16%. Id. In addition, in repeat player arbitrations,
plaintiffs recovered approximately 11% of the amount demanded. Id. In non-repeat
player arbitration, the amount recovered was 48% of the amount demanded. Id.
271. See Samuel Estreicher, Predispute Agreements to Arbitrate Statutory
Employment Claims, 72 N.Y.U. L. REV. 1344, 1355 (1997). It has been suggested
that the lawyers for both plaintiff and defendant are the true “repeat players” rather
than the employers themselves.

2006] ARBITRATION: THE BASICS 67
need the services of this or any other arbitrator after the resolution of the
claim. 272
Fourth, there is concern that an arbitrator who sits on a permanent
panel is less likely to be impartial. In labor disputes between an
employer and a union, a permanent arbitrator may unconsciously or
consciously keep the number of decisions balanced so neither the
employer nor the union wins too often. The arbitrator may want to keep
the decisions balanced for fear of being removed from the panel by the
union or the employer. An arbitrator on a permanent panel becomes
quite familiar with the advocates.
Until recently, arbitrators have rarely been removed for bias.
Partiality of the arbitrator is a more recent basis to challenge an
arbitration award. 273 A court can vacate an award if the arbitrator has
had substantial past communications with one of the parties, or fails to
disclose past dealings which may present a conflict of interest. 274 But,
failure to disclose a conflict will not necessarily result in the vacatur of
an arbitral award on the basis of evident partiality. 275 Justice White
272. Alternative explanations other than bias exist to explain the repeat player
effect. For example, it is possible that cases that go to mandatory arbitration have
little merit, because employers settle stronger claims earlier. Lisa B. Bingham, Selfdetermination
in Dispute System Design and Employment Arbitration, 56 U. MIAMI
L. REV. 873, 900 (2002). Repeat players enjoy a number of advantages over nonrepeat
players: “(1) experience leading to changes in how the repeat player
structures the next similar transaction; (2) expertise, economies of scale, and access
to specialist advocates; (3) informal continuing relationships with institutional
incumbents; (4) reputation and credibility in bargaining; (5) long-term strategies
facilitating risk-taking in appropriate cases; (6) influence over rules through
lobbying and other use of resources; (7) playing for precedent and favorable future
rules; (8) distinguishing symbolic and actual defeats; and (9) resources invested in
getting rules favorable to them implemented.” Bingham, supra note 246, at 223.
273. Korland, supra note 7, at 815. The FAA, however, does not establish
guidelines for determining if there is a conflict, so guidelines are distilled from case
law and the recommendations of various organizations. Id. at 821. For example,
the American Bar Association’s Code of Ethics for Arbitrators in Commercial
Disputes provides that an arbitrator must reveal any “‘financial or personal interest
in the outcome of the arbitration,’ as well as business, professional, familiar, or
social relationships with any party, counsel, or witness that might impugn their own
impartiality.” Id. at 822.
274. Commonwealth Coatings Corp. v. Cont’l Cas. Co., 393 U.S. 145, 150
(1968) (holding that it is improper “to authorize litigants to submit their cases and
controversies to arbitration boards that might reasonably be thought biased against
one litigant and favorable to another”).
275. Korland, supra note 7, at 821-822. In ANR Coal v. Cogentrix of North
Carolina, Inc., the Fourth Circuit set fourth four factors to consider when an

68 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
cautions courts to “minimize [their] role . . . as judge of the arbitrators’
impartiality. That role is best consigned to the parties, who are the
architects of their own arbitration process and are far better informed of
the prevailing ethical standards and reputations within their business.” 276
The AAA has become so concerned with potential conflicts of interest
that it requires a detailed check sheet and cautions that, if there is an
allegation of conflict of interest, the arbitrator will be removed from the
list of arbitrators until the matter is settled. 277
C. Limited Discovery for Even Complex Cases
The arbitration process limits discovery. One of the key objectives
of arbitration is to avoid the complex procedures and costly and time
consuming discovery which seems part of even the most ordinary of
lawsuits. According to a court in Colorado, “[a]s a general rule,
discovery as to arbitrable disputes is denied except upon a showing of
need.” 278 The court further stated that discovery may be permitted
arbitrator fails to disclose a potential conflict of interest: “(1) the extent and
character of the personal interest, pecuniary or otherwise, of the arbitrator in the
proceeding; (2) the directness of the relationship between the arbitrator and the
party he is alleged to favor; (3) the connection of that relationship to the arbitration;
and (4) the proximity in time between the relationship and the arbitration
proceeding.” Id. at 828 (citing ANR Coal v. Cogentrix of N.C., Inc., 172 F.3d 493,
500 (4th Cir. 1999)). Rule 16 of the AAA’s Commercial Arbitration Rules
provides:
(a) Any person appointed or to be appointed as an arbitrator shall disclose to the
AAA any circumstance likely to give rise to justifiable doubt as to the arbitrator’s
impartiality or independence, including any bias or any financial or personal
interest in the result of the arbitration or any past or present relationship with the
parties or their representatives. Such obligation shall remain in effect throughout
the arbitration.
(b) Upon receipt of such information from the arbitrator or another source, the
AAA shall communicate the information to the parties and, if it deems it
appropriate to do so, to the arbitrator and others.
(c) In order to encourage disclosure by arbitrators, disclosure of information
pursuant to this Section R-16 is not to be construed as an indication that the
arbitrator considers that the disclosed circumstance is likely to affect impartiality or
independence.”
Id. (citing AAA Rules, supra note 37, R-16).
276. Commonwealth Coatings Corp., 393 U.S. at 151 (White, J., concurring).
277. AAA Code of Ethics, supra note 101, Cannon II; AAA Rules, supra note
37, R-17, R-18.
278. Block 175 Corp. v. Fairmont Hotel Mgmt. Co., 648 F. Supp. 450, 453 (D.
Colo. 1986).

2006] ARBITRATION: THE BASICS 69
“where the taking of discovery would not unnecessarily delay the
arbitration proceedings and the plaintiff could obtain evidence to prove
its case to the arbitrators that was otherwise unavailable.” 279 In complex
arbitration cases there may be more than minimal discovery necessary,
but the extent of discovery is still limited and not as expansive as court
litigation would allow. 280 Arbitrators are not inclined to grant extensive
discovery even when the advocates think it may be necessary. 281
Extensive discovery is contrary to the “quick, efficient, economical and
fair” objectives of the arbitration process. Some arbitrators see discovery
as inimical to the very reason for arbitration. The parties can include in
the arbitration clause language which permits extensive or limited prearbitration
discovery. Such language will be binding on the parties. 282
D. Process Too Complicated, Too Slow, Too Expensive
As the use of arbitration has increased, the process has become more
complicated, legalistic, expensive, and slow. 283 The complexity of the
arbitration procedure has increased. Rules have developed almost like
rules of civil procedure. The process can be much too slow. The Federal
Mediation and Conciliation Services (FMCS) reported that in 2004,
476.08 days was the average time for an arbitration to reach resolution
once a grievance was filed. 284 The arbitration hearing itself averaged
279. Id.
280. AAA Rules, supra note 37, L-4(c). “The parties may conduct such
discovery as may be agreed to by all the parties provided, however, that the
arbitrator(s) may place such limitations on the conduct of such discovery as the
arbitrator(s) shall deem appropriate. If the parties cannot agree on production of
documents and other information, the arbitrator(s), consistent with the expedited
nature of arbitration, may establish the extent of the discovery.” Id.
281. See Maltby, supra note 8, at 33. In an employment discrimination claim,
limited discovery is more likely to hurt the plaintiff-employee than the employer.
Id. The plaintiff carries the burden of proof, and the employer is likely to have
information that the employee cannot easily get access to. Id. The employer
maintains employee records and has access to other employees who may be
witnesses. Id.
282. See Champ v. Siegel Trading Co., 55 F.3d 269, 277 (7th Cir. 1995) (holding
that the court “must rigorously enforce the parties’ agreement as they wrote it”).
283. See Frank E. Massengale & Karen Kaler Whitfield, Arbitration: Be Careful
What You Wish For, 44 LA. B.J. 120, 121 (1996); see also Alain Frécon, Delaying
Tactics in Arbitration, 59 DISP. RESOL. J. 40 (2004).
284. Federal Mediation and Conciliation Service, Arbitration Statistics, supra
note 219.

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317.14 days from panel request to final award. 285 This may be faster
than getting to trial, but not that much faster in many states. 286
The arbitration process can be too expensive. One of the often cited
benefits of arbitration is that it saves money. 287 Yet, there is no scientific
evidence to prove that litigation is actually more costly than
arbitration. 288 Arbitrators in large commercial disputes and important
labor disputes are well paid. It is not unusual for well-known arbitrators
in the United States to charge two to three thousand dollars per day. 289
International arbitrators charge fees in excess of their domestic
counterparts. 290 The nature and complexity of disputes submitted to
285. Id.
286. U.S. District Court for the District of Minnesota, Rules of Procedure for
Expedited Trials (effective July 2, 2001), http://www.mnd.uscourts.gov/ (expedited
trial rule is separate from U.S. District Court for the District of Minnesota Local
Rules L-1 thru L-83 (effective May 16, 2005)).
287. Bompey, Delikat, & McClelland, supra note 270, at 34.
288. Elizabeth Hill, Due Process at Low Cost: An Empirical Study of
Employment Arbitration Under the Auspices of the American Arbitration
Association, 18 OHIO ST. J. ON DISP. RESOL. 777, 784 (2003).
289. Richard M. Alderman, Pre-dispute Mandatory Arbitration In Consumer
Contracts: A Call for Reform, 38 HOUS. L. REV. 1237, 1250 n.53 (2001).
290. See ICC Rules, supra note 84, at app. III(B). In the following table adapted
from the ICC, one can see that an arbitrator handling a $100 million case for the
ICC would be compensated between $61,750 and $285,800. Id.
Sum in Dispute Administrative Arbitrators’ Fees
(in US dollars) Expenses
Minimum Maximum
up to 50,000 2500 2500 17% of amount in
dispute
50,001 to 100,000 2500 + 3.5% of 2500 + 2% of amt. 8500 + 11% of
amt. over 50,000 over $50,000 amt. over 50,000
100,001 to 4250 + 1.7% of 3500 + 1% of amt. 14,000 + 5.5% of
500,000
500,001 to
1,000,000
1,000,001 to
2,000,000
2,000,001 to
5,000,000
amt. over 100,000
11,050 + 1.15% of
amt. over 500,000
16,800 + .7% of
amt. over
1,000,000
23,800 + .3% of
amt. over
2,000,000
over 100,000
7500 + .75% of
amt. over
1,000,000
11,250 + .5% of
amt. over
1,000,000
16,250 + .25% of
amt. over
2,000,000
amt. over 100,000
36,000 + 3.5% of
amt. over 500,000
53,500 + 2.75% of
amt. over
1,000,000
81,000 + 1.12% of
amt. over
2,000,000

2006] ARBITRATION: THE BASICS 71
arbitration have increased. The costs of arbitrating highly complex
claims are similar to the costs of litigation. 291 Yet, in favor of arbitration
it is said that “adaptability and access to expertise are hallmarks of
arbitration.” 292 Maybe for these reasons, arbitration is favored today.
E. Non-Lawyer Oriented
The arbitration process uses both lawyer and non-lawyer arbitrators
and advocates. In labor arbitration, it is not unusual for a non-lawyer,
business representative to act as the advocate in a grievance arbitration
hearing. Because of business expertise, business experts are chosen as
arbitrators. The AAA rules do not require an arbitrator to have a legal
background. “[T]hey are experts in their own fields, they are known for
their good judgment, they are respected for their fairness, and they are
honored for putting time and talent at the disposal of others without
thought of personal gain.” 293
But, non-lawyer arbitrators may lack the legal knowledge to deal
with the dispute and the procedural knowledge needed to run a fair
hearing. The United States Supreme Court recognized that “the
specialized competence of arbitrators pertains primarily to the law of the
5,000,001 to
10,000,000
10,000,001 to
50,000,000
50,000,001 to
80,000,000
80,000,001 to
100,000,000
32,800 + .2% of
amt. over
5,000,000
42,800 + .07% of
amt. over
10,000,000
70,800 + .06% of
amt. over
50,000,000
23,750 + .1% of
amt. over
5,000,000
28,750 + .05% of
amt. over
10,000,000
48,750 + .03% of
amt. over
50,000,000
88,800 57,750 + .02% of
amt. over
80,000,000
over 100,000,000 88,800 61,750 + .01% of
amt. over
100,000,000
114,600 + .616%
of amt. over
5,000,000
145,400 + .193%
of amt. over
10,000,000
222,600 + .136%
of amt. over
50,000,000
263, 400 + .112%
of amt. over
80,000,000
285,800 + .056%
of amt. over
100,000,000
291. Kelly Burton Beam, Administering Last Rites to Employee Rights:
Arbitration Enforcement and Employment Law in the Twenty-first Century, 40
HOUSTON L. REV. 499, 530 (2003).
292. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614,
633 (1985).
293. American Arbitration Association, supra note 232.

72 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
shop, not the law of the land.” 294 The various arbitration agencies list
arbitrators who do have both legal and procedural knowledge. It is
possible for even an experienced arbitrator, especially a non-law trained
arbitrator, to lack the specific legal knowledge involved in the conflict.
The consequences of an arbitrator’s lack of legal knowledge can be
serious in cases that implicate important institutional and legal matters
such as Civil Rights, Antitrust, RICO, intellectual property, tax disputes,
etc. 295 Nonetheless, such disputes can be heard by lawyer and nonlawyer
arbitrators. In these cases, the arbitrator may have to take into
account the law and social policy. Application of legal and public policy
considerations may be particularly problematic for an arbitrator who has
not received legal training.
F. Arbitrability of Statutory Rights
Some argue that disputes which implicate a party’s statutory rights
should be dealt with only by courts and not by arbitrators, especially
non-lawyer arbitrators. 296 The United States Supreme Court, however,
has repeatedly held that such disputes are arbitrable, even though they
involve a party’s statutory rights. 297 The important question becomes
294. Alexander v. Gardner-Denver Co., 415 U.S. 36, 57 (1974).
295. CARBONNEAU, supra note 14, at 245-46; see Shearson/Am. Express v.
McMahon, 482 U.S. 220 (1987) (holding disputes under the Securities Exchange
Act of 1934, and the Racketeer Influenced and Corrupt Organizations Act (RICO)
are arbitrable); Cole v. Burns Int’l Sec. Servs., 105 F.3d 1465 (D.C. Cir. 1996)
(dismissing complaint under Title VII of the Civil Rights Act of 1964 and
compelling arbitration).
296. Thomas E. Carbonneau, Arbitral Justice: The Demise of Due Process in
American Law, 70 TUL. L. REV. 1945, 1958 (1996):
The Court’s unbridled support for arbitration is at once surprising and unnecessary.
The Court’s willingness to curtail major constitutional and political interests - such
as states’ rights and federalism, civil rights, federal regulatory authority over the
marketplace, and generally, due process guarantees—to bolster arbitration benefits
neither the legal culture nor, in the long run, the institution of arbitration itself. In
addition, the quality of the Court’s reasoning in these cases detracts from the
credibility of the announced doctrine. To have the highest court in a legal system
dominated by the technicalities of legal procedure state that arbitration is a “mere
form of trial” that does not affect the content of the statutory rights submitted to
arbitration, is incredible and preposterous. Foreign and even domestic arbitrators
will view legal claims arising under U.S. statutes differently than federal judges
and will conduct hearings in a different fashion.
Id.
297. Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (1991) (holding
that claims under the Age Discrimination in Employment Act are arbitrable);

2006] ARBITRATION: THE BASICS 73
whether an arbitrator should examine the law before making the decision
or whether an arbitrator should strictly interpret the “four corners” of the
contract without regard to statutory law. The question frequently arises
in employment dispute cases because many employment disputes
involve civil rights, such as racial discrimination, disability
discrimination, or age discrimination. In the employment arbitration, the
arbitrator is often required to deal with socially sensitive areas where
Congress has enacted specific laws.
Critics of arbitration argue that arbitration is not the appropriate
forum for dealing with these sorts of conflicts. The critics contend
arbitration of such disputes hinders the development of the law, that
arbitration will affect the Equal Employment Opportunity Commission’s
ability to enforce the law, 298 that arbitration is too expensive, and that
arbitration does not have sufficient procedural safeguards to allow
effective vindication of such claims. 299 Opponents of arbitration argue
that some mandatory pre-dispute agreements are inherently
unconscionable because there is unequal bargaining power between the
parties. 300 Even the critics do not oppose agreements to arbitrate
employment disputes after the dispute (post-dispute) has arisen. 301
The Court stated that arbitrators can, and should, if the contract
demands, apply substantive law in disputes that deal with statutory
rights. 302 In Gilmer, the Court found that, “[b]y agreeing to arbitrate a
Rodriguez de Quijas v. Shearson/Am. Express, Inc., 490 U.S. 477, 483 (1989)
(holding that claims under the Securities Act of 1933 are arbitrable).
298. See EEOC v. Waffle House, Inc., 534 U.S. 279, 297-98 (2002) (holding that
while employee was compelled arbitrate, EEOC was not barred from pursuing
enforcement action and victim specific relief on behalf of employee).
299. David Sherwyn, Because It Takes Two: Why Post-Dispute Voluntary
Arbitration Programs Will Fail to Fix the Problems Associated with Employment
Discrimination Law Adjudication, 24 BERKELEY J. EMP. & LAB. L. 1, 22 (2003).
Despite criticism that arbitration will affect the EEOC’s ability to enforce laws
against discrimination, employees can file a claim with the EEOC even when they
are forced to arbitrate their claims. Id. at 24. The EEOC can still litigate on behalf
of an employee, and the employees can be awarded all statutory remedies. Id. It
should also be noted that the EEOC has taken the position that employees bringing
Title VII claims should not be subject to mandatory pre-dispute arbitration
agreements. Id. at 5 (citing EEOC Notice No. 915.002 (July 10, 1997)).
300. Samuel Estreicher, supra note 271, at 1353.
301. Id. at 1344. If employees could choose whether they wished to engage in
arbitration, employers would be forced to either design a fair arbitral scheme or
litigate all claims brought against them. Maltby, supra note 8, at 37.
302. Gilmer, 500 U.S. at 26. It should be noted, however, that a party does
forfeit certain procedural rights by agreeing to submit a dispute to arbitration.

74 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
statutory claim, a party does not forgo the substantive rights afforded by
the statute; it only submits to their resolution in an arbitral, rather than a
judicial forum.” 303 The Gilmer Court held that, “[a]lthough all statutory
claims may not be appropriate for arbitration, ‘[h]aving made the bargain
to arbitrate, the party should be held to it unless Congress itself has
evinced an intention to preclude a waiver of judicial remedies for the
statutory rights at issue.’” 304
G. Lack of Transparency
If arbitration involves a socially sensitive area, should the arbitration
be open to the public? 305 An arbitration hearing is closed—open only to
parties, advocates and witnesses except by agreement of the parties that it
be open to the public. Arbitration matters are not transparent. But this
can be a problem. A particular arbitration decision might have a
dramatic impact on society. Lack of transparency can mean a decision is
made where the pubic is affected but the public does not know about the
Employees who are forced to arbitrate their claims give up the right to a jury trial.
Maltby, supra note 8, at 37. The right to a trial by jury is such an important right
that many argue that employees should not be forced to waive it as a condition of
employment. Id. However, a trial is not a reality for most employees. Id. at 57. A
plaintiff must have approximately $60,000 in provable damages before a lawyer
will accept the case on a contingency basis. Id. In addition, many attorneys charge
a retainer of about $3,000 and require the plaintiff to pay all out of pocket expenses
(estimated between $10,000 and $25,000) as they occur. Id. Approximately 95%
of employees who seek legal representation for an employment discrimination claim
are not able to retain legal counsel. Id. at 58. Due process may also be
compromised when the employer has the ability to choose the only arbitrator. Id. at
33. In 1994, the American Bar Association developed a due process protocol for
arbitration which has been adopted by the AAA and JAMS/Endispute. Id. at 39.
The American Civil Liberties Union, National Employment Lawyer’s Association,
and the AFL-CIO were involved in the development of the protocol. Id. A fair
arbitration process includes: “(a) a neutral and unbiased arbitrator; (b) right of the
employee to an equal role in selecting the arbitrator; (c) right to counsel; (d) right to
reasonable discovery; (e) identical remedies to those available in court; and (f) a
written opinion.” Id.
303. Gilmer, 500 U.S. at 26 (quoting Mitsubishi Motors Corp v. Soler Chrysler-
Plymouth, Inc., 473 U.S. 614, 628 (1985)).
304. Id.
305. Maltby, supra note 8, at 42-43. When employers know that an arbitration
proceeding will remain private, they have less incentive to change discriminatory
policies, because there is not a risk of adverse publicity. Id. However, employees
may also benefit from the privacy aspect of arbitration if the claim involves a
sensitive personal matter. Id.

2006] ARBITRATION: THE BASICS 75
decision because it is confidential.
H. Arbitrator’s Lack of Power and Control
In some respects, arbitrators lack the power and control needed to
carry on an effective adversarial proceeding. The arbitrator has no
authority to impose fines or sanctions on an advocate, as a judge does
under Rule 11 of Civil Procedure. 306 Arbitrators are unable to sanction
attorneys for filing frivolous cases, bad behavior, or unethical actions.
However, the parties in their contract can agree to give the arbitrator the
power to impose sanctions.
An arbitrator lacks the power to compel a person to comply with a
decision or a subpoena. 307 The arbitrator has no power or authority to
order the decision to be implemented. The arbitrator has no authority to
enforce a subpoena. A subpoena or a decision rendered in an arbitration
proceeding is only enforceable in a court of law. “A right without a
remedy is not a legal right; it is merely a hope or a wish.” 308
I. Punitive Damages are Unusual Even when the Facts Warrant
An arbitrator has the power to award equitable remedies. 309 “To
deny arbitrators the full range of remedial tools generally available under
the law would be to hamstring arbitrators and to lessen the value and
efficiency of arbitration as an alternative method of dispute
resolution.” 310
What if one side engaged in outrageous conduct? In a civil lawsuit,
punitive damages might be permitted. 311 While punitive damages are
legally permitted in arbitration, arbitrators are hesitant to use them. 312
306. Rule 11 allows a judge to sanction an attorney, law firm or party who bring
a lawsuit for purposes of harassment or who brings a frivolous suit. FED. R. CIV. P.
11.
307. Section 7 of the Federal Arbitration Act grants an arbitrator the power to
“summon in writing any person to attend before them or any of them as a witness
and in a proper case to bring with him or them any book, record, document, or
paper.” 9 U.S.C. § 7 (2004).
308. Donald H. Zeigler, Rights Require Remedies: A New Approach to the
Enforcement of Rights in the Federal Courts, 38 HASTINGS L. J. 665, 678 (1987).
309. Willoughby Roofing & Supply Co. v. Kajima Int’l, Inc., 598 F. Supp. 353
(N.D. Ala. 1984), aff’d, 776 F.2d 269 (11th Cir. 1985); see UNIFORM ARBITRATION
ACT § 21 (2000).
310. Willoughby Roofing & Supply, 598 F. Supp. at 362.
311. RESTATEMENT (SECOND) OF TORTS § 908 (2004).
312. ELKOURI & ELKOURI, supra note 35, at 1216-17 (noting that punitive

76 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
Perhaps arbitrators should use punitive damages in egregious
circumstances. “Punitive damages are damages . . . awarded against a
person to punish him for his outrageous conduct and to deter him and
others like him from similar conduct in the future.” 313
J. No Better Result Than Litigation
There is no proof that arbitrators’ decisions and awards are superior
to judge and jury awards. Research has shown that employees are more
likely to win in arbitration but that they receive lower awards than if they
had won in litigation. 314 Some argue that the reason for such a result is
the tendency on the part of arbitrators to split the decision, but empirical
study of this phenomenon is scarce and conflicting. 315 It may be easier
to split the difference rather than make a principled decision, especially if
the arbitrator hopes to be picked again. 316
K. No Review or Appeal
One of the strengths of arbitration is that, once an arbitrator issues
an award, the decision is final. 317 But what if the arbitrator is wrong?
damages may adversely affect continuing working relationships, or may expose an
award to vacation by the courts if it is believed the arbitrator exceeding his authority
by awarding punitive damages).
313. RESTATEMENT (SECOND) OF TORTS § 908; see Mastrobuono v. Shearson
Lehman Hutton, Inc. 514 U.S. 52, 58 (1995) (holding that the “decisions in Allied-
Bruce, Southland, and Perry make clear that if contracting parties agree to include
claims for punitive damages within the issues to be arbitrated, the FAA ensures that
their agreement will be enforced according to its terms even if a rule of state law
would otherwise exclude such claims from arbitration”). However, if an arbitration
agreement or the rules governing the arbitration require the arbitrator to follow the
substantive law, the arbitrator exceeds his power if he fails to apply the substantive
law. As a result, the award may be vacated. Buchele & Rute, supra note 13, at 44.
314. See Maltby, supra note 8, at 48, 49, tbl. 1. According to one study,
employees won 68% of cases submitted to arbitration, but received only 25% of the
amount of damages requested. Id. In litigation, employees won only 14.9% of
claims brought, but prevailing employees received 70% of the relief requested. Id.
315. Christopher R. Drahozal, A Behavioral Analysis of Private Judging, 67 LAW
& CONTEMP. PROBS. 105, 114-18 (2004).
316. Alan Scott Rau, Integrity In Private Judging, 38 S. TEX. L. REV. 485, 523
(1997).
317. Maltby, supra note, 139, at 25. Employees are often unable to bear the cost
of litigation. Arbitration is supposed to address this problem “by providing a final
decision in an affordable tribunal.” Id. However, “[t]his solution is diluted if the
wealthier party can afford to initiate expensive judicial review.” Id.

2006] ARBITRATION: THE BASICS 77
Case law has allowed incorrect factual and incorrect legal analysis by an
arbitrator to stand. 318 There are limited grounds for appeal of an
arbitration decision. 319 The standard for overturning an arbitration award
is very high and difficult for the parties to meet. 320 “An arbitrator, in
absence of any agreement limiting his authority, is the final judge of both
law and fact, including the interpretation of the terms of any contract,
and his award will not be reviewed or set aside for mistake of either law
or fact in absence of fraud, mistake in applying his own theory,
318. See Local Union 59, Int’l Bhd. of Elec. Workers, AFL-CIO v. Green Corp.,
725 F.2d 264, 268 (5th Cir. 1984). “The promotion of the national policy favoring
the resolution of labor disputes by arbitration eliminates searching judicial review of
the factual and legal accuracy of arbitrators’ findings.” Id.
319. See supra notes 241-254 and accompanying text for a discussion on the
appealability of an arbitral decision.
320. 9 U.S.C. § 10 (2004).
Section 10. Same; vacation; grounds; rehearing
a. In any of the following cases the United States court in and for the district
wherein the award was made may make an order vacating the award upon the
application of any party to the arbitration
1. Where the award was procured by corruption, fraud, or undue means.
2. Where there was evident partiality or corruption in the arbitrators, or either of
them.
3. Where the arbitrators were guilty of misconduct in refusing to postpone the
hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and
material to the controversy; or of any other misbehavior by which the rights of any
party have been prejudiced.
4. Where the arbitrators exceeded their powers, or so imperfectly executed them
that a mutual, final, and definite award upon the subject matter submitted was not
made.
5. Where an award is vacated and the time within which the agreement required
the award to be made has not expired the court may, in its discretion, direct a
rehearing by the arbitrators.
Id. For enforcement under international law, reference the requirements of the New
York Convention. United Nations Convention on the Recognition and Enforcement
of Foreign Arbitral Awards, art. V (1958).
Parties have begun to include provisions in their arbitration agreements that
provide for expanded judicial review of an arbitrator’s award. Both the courts and
commentators are divided on whether such a provision is valid. See Lee Goldman,
Contractually Expanded Review of Arbitration Awards, 8 HARV. NEGOTIATION L.
REV. 171, 174 (2003). Proponents of expanded review argue that since arbitration
is a creature of contract, parties should be able to contract for more expansive
grounds for review. Id. at 175.

78 THE JOURNAL OF AMERICAN ARBITRATION [Vol. 5:1
misconduct or other disregard of duty.” 321
L. Is the Process of Arbitration to Achieve a Final Decision or to Seek
Truth and Find Justice
Justice Thurgood Marshall proposed that, “the governing principle
of a humane society and a good legal system . . . [is to] recognize the
worth and importance of every person . . . [and] be perceived by all the
people as providing equal justice.” 322 Ultimately, what should an
arbitrator do? Is an arbitrator only to interpret the four corners of the
contract? Or, is the arbitrator’s role to find truth and justice? Is the
process of arbitration simply a process to lead to a final decision; or is it
a process to seek truth and find justice?
X. CONCLUSION
Thomas Jefferson wrote, “I know no safe depository of the ultimate
powers of the society but the people themselves; and if we think them
not enlightened enough to exercise their control with a wholesome
discretion, the remedy is not to take it from them, but to inform their
discretion.” 323 Arbitration puts power in the hands of the parties in the
conflict. The parties are responsible for drafting the arbitration clauses,
which determine the who, what, when, where, how, and why of settling
disputes.
Arbitration is intended to be an economical process. But
“[i]nexpensive, expeditious and informal adjudication is not always
synonymous with fair and just adjudication.” 324 Arbitration must be an
equitable process equivalent to litigation. 325 In the end the AAA Code of
321. Ehlert v. W. Nat’l Mut. Ins. Co., 207 N.W.2d 334, 336 (1973) (quoting
Cournoyer v. Am. Television & Radio Co., 83 N.W.2d 409, 411 (1957)).
322. Michael Z. Green, Preempting Justice Through Binding Arbitration of
Future Disputes: Mere Adhesion Contracts or a Trap for the Unwary Consumer, 5
LOY. CONSUMER L. REV. 112 (1993) (citing Mr. Justice Marshall Lives on in His
Words, NAT’L L.J., Feb. 8, 1993, at 8 (Statements by Justice Thurgood Marshall at
the Eighth Conference on the Law of the World, (1977)).
323. Letter from Thomas Jefferson to William Charles Jarvis (Sept. 28, 1820),
cited in Larry D. Kramer, The Supreme Court 2000 Term Foreword: We the Court,
115 HARV. L. REV. 4, 86 (2001).
324. Harry T. Edwards, Alternative Dispute Resolution: Panacea or Anathema?,
99 HARV. L. REV. 668, 679 (1986).
325. See AAA, Code of Ethics, supra note 101, at Canon I(A). Canon I(A) of the
AAA Code of Ethics states:

2006] ARBITRATION: THE BASICS 79
Ethics for Arbitrators in Commercial Disputes states it well, “[a]n
arbitrator has a responsibility not only to the parties but also to the
process of arbitration itself, and must observe high standards of conduct
so that the integrity and fairness of the process will be preserved.” 326
An arbitrator has a responsibility not only to the parties but also to the process of
arbitration itself, and must observe high standards of conduct so that the integrity
and fairness of the process will be preserved. Accordingly, an arbitrator should
recognize a responsibility to the public, to the parties whose rights will be decided,
and to all other participants in the proceeding. This responsibility may include pro
bono service as an arbitrator where appropriate.
326. Id.