Arbitration has been a popular dispute resolution option in the construction industry. It is, in fact, a standard provision within many construction contracts. Generally believed to be a simpler, faster and better option to resolve a difference of opinion, this has proven to not always be the case. These are 4 reasons why.
No Longer So Simple. It was often thought that discovery had no place in arbitration. That is not true. Discovery in an arbitration proceeding can be as long and as expensive as it is in litigation. While the parties can indeed limit the amount and type of discovery conducted in arbitration, that doesn’t always occur, especially in these days of complicated issues.
Just As Time Consuming. It is not unusual for a significant arbitration to take as long as a lawsuit from initial filing to final ruling. Scheduling all the parties and then coordinating their availability with that of their lawyers and the arbitrators is a challenge. It is therefore not unusual for arbitration hearings to be spread out over several months. As cases have become more complex, so has the ability to argue any particular position in one continuous presentation.
Not So Cheap. Parties are often surprised when they learn the amount of filing fees and administrative costs associated with arbitration, not to mention the professional fees charged by the arbitrators – costs that are absent in a state court or federal litigation where filing fees are in the hundreds of dollars and judges are paid by the taxpayers.
Rarely Appealable. Something not always understood by non-lawyers, an arbitration decision is rarely appealable – even if it is based on an incorrect interpretation of the law. Absent a showing of fraud, bias or a corrupt arbitrator, it is near impossible to overturn a bad decision by an arbitration panel.
Arbitration may have its place in certain construction disputes, but parties need to make such a decision fully aware of the pros and cons of proceeding down this road.