Arbitration: The 'New Litigation'
60 Pages Posted: 9 Nov 2008 Last revised: 24 Jan 2010
Date Written: November 7, 2008
Today, binding arbitration procedures are employed in a wider variety of contracts than at any time in our nation's history, and arbitration has become a wide-ranging surrogate for court trial of civil disputes. As a result, arbitration is subjected to unprecedented stresses and strains, and it is fair to say that arbitration has never been subject to wider criticism.
Once advocates promoted arbitration as a means of avoiding the contention, cost and expense of court trial; economy, efficiency and the opportunity to fashion true alternatives to litigation are still associated with conventional perceptions of arbitration. Yet today business arbitration is more and more frequently described in terms similar to civil litigation -"judicialized," formal, costly, time-consuming, and subject to hardball advocacy. The "legalization" of commercial arbitration is increasingly a leading cause for complaint among business users; at the same time, paradoxically, lawyers are seeking ways of making arbitration even more like court trial, most notably through contractual provisions for expanded judicial review of arbitration awards.
A second, related phenomenon is the parallel emergence of mediation and other "thin-slicing" methods for resolving disputes more quickly and effectively - alternatives often perceived to do a better job of providing the value conventionally associated with arbitration. This proliferation of choices raises important new questions about the utility of arbitration and its place in the landscape of conflict resolution. Finally, the broad enforcement of binding arbitration provisions in standardized adhesion contracts governing employment relationships and consumer transactions has fueled a continuing struggle over the need for regulation of arbitration agreements. The concerns of reform advocates, lawmakers, legal commentators and educators have produced strong responses that affect not only adhesion scenarios but also arms-length business-to-business agreements - often imposing additional transaction costs without commensurate benefits for users of commercial arbitration.
While these developments present important challenges for arbitration, they all point up the critical need for more effective exercise of choice by users of arbitration and those whose decisions affect the arbitration experience. The most important difference between arbitration and litigation - and the primary, central value of arbitration - is the ability of users to tailor processes to serve particular needs. In order to make the most of the promise of arbitration, contract planners and drafters must move beyond a monolithic one-size-fits-all view of arbitration and make deliberate process choices appropriate to client goals and priorities.
Choice may also be effectuated (or reinforced) through the selection of appropriate arbitrators and of sophisticated, thoughtful advocates. The need for a more nuanced approach also requires planners to strategically assess arbitration's utility in the context of a wide range of process choices, including mediation and "thin-slicing" methods. Similarly, those who make or propose laws affecting arbitration and those who prepare tomorrow's lawyers must look "beyond the monolith" to understand that regulation that is cost-beneficial in one transactional setting may be detrimental in another.
Keywords: arbitration, contracts, agreements, dispute, dispute-resolution, litigation, mediation, thin-slicing, choice
JEL Classification: J52, D7, K12, K20, K40, K41, K49
Suggested Citation: Suggested Citation