Choosing an Arbitrator for Your Business Dispute

Selecting an Arbitrator for Your Business Dispute

Many contracts now require the arbitration of disputes instead of allowing for court hearings of claims. Just as important as selecting jurors, lawyers will take care in selecting the arbitrator(s). In many cases, arguing before a sympathetic audience can be the key to winning the case.

The Arbitration Process

During arbitration, a neutral third party (or a panel of arbitrators) is appointed to resolve the business dispute. The number of arbitrators to be selected and the process for selecting them is often set forth in the contract. Much like a judge, an arbitration decision is generally final. While appeal of an arbitration decision is allowed, courts are not going to overturn a decision in arbitration absent a showing of patent material fraud or arbitrator bias or some other defect that renders the arbitration decision so outrageous as to require the court to deviate from the pro-arbitration mandate shown in several decades of United States Supreme Court decisions.

Although business arbitration typically involves the submission of legal briefs and evidentiary hearings with sworn testimony of witnesses, the formal rules of evidence don’t apply (unless the arbitrators say otherwise), and there is often no required discovery process. Rather the parties must only comply with the rules of the particular forum, such as the American Arbitration Association. Overall, arbitration is far less formal and tends to proceed more quickly than business litigation. As a result, it can be usually far less costly than court proceedings, depending on the costs charged by the arbitrators selected and by the forum.

Selecting Arbitrators

Unlike litigation, arbitration allows the parties to have a say in who decides their dispute. Many agreements call for a three-person arbitration panel. Most commonly, each party is authorized to appoint one arbitrator. The arbitrators selected by the parties then appoint a third individual to serve as an arbitrator and chair the panel. Alternatively, the forum provides a list of arbitrators experienced in the type of dispute at issue from which to chose.

Most arbitration tribunals require arbitrators to be independent and impartial. Accordingly, arbitrators may not have personal and/or business relationships with the parties, lawyers, or potential witnesses and must decide the dispute based on the merits of the case rather than any pre-existing bias. However, that does not mean that the parties can’t seek to appoint arbitrators they believe will look favorably on their positions.

With that in mind, lawyers will consider a number of factors when selecting an arbitrator.

• Knowledge of the subject matter
• Expertise in industry or technology involved
• Previous published decisions
• Professional background
• Published articles and speeches

The personality of the arbitrator can be as important to know as the characteristics listed above. So it is a good idea to ask around to see if someone you know has dealt with the potential arbitrator. Experienced business lawyers often have a list of preferred arbitrators that they have successfully used in the past or those that have solid reputations in the legal community.