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

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20 THE JOURNAL OF AMERICAN ARBITRATION [<strong>Vol</strong>. 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
<strong>2006</strong>] 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:
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