Arbitration is Becoming Litigation "Light"

Once upon a time, arbitration was fast, efficient, and economical. Arbitration proceedings were typically completed in no more than 12 months from start to finish. A demand was filed, a hearing was conducted, and an award was issued. Briefs were limited, and court reporters were the exception, not the rule. There were no depositions or motions just an exchange of documents and an evidentiary hearing. There were no monthly administrative fees, just filing fees and fees associated with the hearing. Arbitration panels included industry representatives, not just attorneys. Evidentiary hearings were generally started and completed on a continuous basis. The arbitration process was fast, efficient, and easy. Arbitration was completely different than litigation, not its mirror image. Unfortunately, those days are long since gone!

Today,  arbitration is slow, cumbersome, and expensive. Arbitration is looking more and more like "litigation light". Most arbitration proceedings require more than 18 months to complete. Discovery and motion practice have found their way into arbitration. But unlike court, arbitration now has monthly or quarterly administrative fees. Briefs are now common and court reporters have become the norm. Arbitration panels often consist solely of attorneys and retired judges. Depositions, administrative hearings, motions, and substantive hearings, delay and increase costs of what was once a fast and efficient process. Evidentiary hearings are often started, stopped, started again, and completed on a disjointed basis. Over the last 30 years, arbitration has transformed into “litigation light”. 

Despite its growing similarities to litigation, arbitration will always remain a better alternative than trying highly technical issues to a jury. Parties provide input into the selection of arbitrators. Arbitrators typically have more topical related experience than do judges, and especially juries. Arbitrators are more flexible than judges in matters of scheduling. Discovery is more limited than litigation. Scheduling hearings is far more flexible than courts. While arbitration is becoming more like "litigation light", arbitration still maintains some benefits.

But those benefits come at great cost. Filing fees due with an arbitration demand can range up to $20,000. Administrative fees are then assessed on a monthly or quarterly basis. The average fee for an arbitrator is $400 - $500 per hour. Fees for a panel of three arbitrators averages $1,200 - $1,500 per hour. Costs for an average hearing day with a panel of three arbitrators costs between $10,000 and $15,000 per day, not including room costs. In contrast the only costs of a lawsuit are filing fees which typically range no more than several hundred dollars.

The transformation of arbitration into “litigation light” has been a slow, but constant process. Most commentators and educators fail to recognize, much less acknowledge the transformation. But practitioners who have been practicing 20 or more years certainly recognize and acknowledge the changes that have taken place. While most highly experienced arbitrators recognize and acknowledge the transformation of arbitration into “litigation light”, many reluctantly allow the changes to occur and even expand. Perhaps there is no way to prevent arbitration from becoming more and more like litigation. But if we are to retain the original purpose and intent of arbitration, we must recognize, acknowledge, and remain true to its roots. Otherwise, the use of arbitration as a fast, efficient, and economical option for dispute resolution will be gone forever.

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