What is an arbitrator’s primary obligation? If you put that question to most arbitrators or representatives of arbitral institutions, you will get the same answer: to render an enforceable award. That consensus is so universal that when the question is posed to the AI tool Perplexity—which is presumably synthesizing the entirety of the internet—the answer it gives is: “An arbitrator’s primary obligation is to ensure that the award is enforceable at law.”
I argue that the universal consensus is wrong and that it vastly diminishes the arbitrator’s role to call rendering an enforceable award the primary objective. After all, no award is issued in the overwhelming majority of arbitrations. The statistics vary, but it is safe to say that tribunals issue final awards in only 15% to 30% of cases. And arbitrators undoubtedly have a meaningful role in the other 70% to 85%. Thus, an arbitrator’s foremost, overarching responsibility includes—but involves much more than—rendering an enforceable award.
This concept is summarized very well in the introduction to the CPR Non-Administered Arbitration Rules, which states: “The primary objective of arbitration is to arrive at a just and enforceable result, based on a private procedure that is fair, expeditious, economical and less burdensome and adversarial than litigation.” (Emphasis added.) CPR consciously avoids using the phrase “enforceable award.” By using “enforceable result” instead, it puts priorities in the right place. The end result of the arbitration need not be a final award, but it does need to be fair, expeditious, economical—and, of course, enforceable.
To varying degrees, all other arbitral institutions also encourage the possibility of a result other than a final award, and they have incorporated explicit requirements for efficiency and economy in their arbitration rules. So when parties agree to have their cases arbitrated under these rules, they have specifically demanded an efficient economical dispute resolution process—whether or not the tribunal will ever issue a final award. Thus, I am proposing a subtle, but meaningful focus-shift, with economy and efficiency taking the lead roles.
I am not suggesting that the tribunal should strongarm parties into settling or that an arbitrator should actively take a mediator’s role. Rather, arbitrators and arbitral institutions need to adjust their procedures to put economy and efficiency first—providing opportunities for the parties to engage in productive settlement discussions throughout the process and incentivizing tribunals to foster early dispute resolution.
The key elements of my suggested approach include:
- Encourage client involvement, beginning with the initial case management conference;
- Set the stage for settlement discussions with an “early arbitration review”;
- Build a mediation window into the schedule; and
- Incentivize arbitrators to promote early dispute resolution.
Before beginning my point-by-point description of the procedures I am proposing, I should note that everything I am suggesting should be done with the recognition that arbitration is a party-driven process. And arbitrators should not force—or coerce—the parties into procedures they do not want. But my proposed procedures are well within the letter and spirit of all major arbitration rules and offering them to the parties is not just an option—it’s an obligation.
Step One: Encourage Client Involvement Early On
The tribunal should strongly encourage client representatives (preferably the ultimate decision-makers) to participate in the initial case management conference. This will allow the clients to better understand the case, and the procedure, from the outset. It will give the tribunal the opportunity to convey the option of mediation, or non-mediated settlement discussions, directly to the parties. And if nothing else, the decision-makers will have a front-row seat to the discussions on how the arbitration will play out. When clients are exposed to the minutiae of arbitration procedures, they see not only the monetary expense but also the productivity cost of going down that road.
Arbitration rules permit—or even encourage—client participation. For example, Article 24(4) of the ICC Rules allows the tribunal to “request the attendance at any case management conference of the parties in person or through an internal representative.” But arbitrators rarely use that essential tool.
Step Two: Hold an Early Arbitration Review
Schedule an early arbitration review—a conference (with client participation)—to review the case. This procedure shares some elements with a process that has become known as a “Kaplan Opening,” but it also differs in significant ways.
I suggest requiring the parties to produce the documents they plan to rely on at the hearing soon after the initial case management conference and then holding the early arbitration review soon after those documents are exchanged. At that point, the tribunal—and the parties—will have read the pleadings and reviewed the reliance documents, so everyone should have a good, initial understanding of the case.
At the early arbitration review, the tribunal should give the parties the opportunity to summarize their cases and then ask detailed questions. As with the initial case management conference, client participation in the early arbitration review is key.
The early arbitration review then should be followed immediately by a pre-scheduled mediation window. The early arbitration review can pay off in many ways: first, it can the stage for productive settlement discussions. The lawyers, the tribunal, and most importantly, the clients, will leave the early arbitration review with a much better understanding of the case.
The tribunal’s questions will give the lawyers and clients a window into the tribunal’s early views. And the clients will have another look at the internal workings of the arbitration process.
All of this should encourage the parties to take a hard look at settlement.
Even if the early arbitration review does not result in productive settlement discussions, it can provide many other benefits that should lead to a more efficient and economical dispute resolution. It can ensure that the tribunal is fully up to speed at an early stage, which will lead to more efficient and better decision-making as the case proceeds. And the arbitrators’ questions can focus the lawyers’ attention on the issues that are most important to the tribunal. That will provide a road map for a more streamlined case presentation.
Step Three: Schedule a Preplanned Mediation Window
One of the biggest impediments to settlement is the parties’ fear of perceived weakness. Neither side wants to broach the subject of settlement out of concern that the mere mention of the idea may damage its negotiating position. Arbitrators can—and should—provide a way for parties to avoid that standoff.
The tribunal can achieve this by raising the idea of a mediation window at the initial case management conference. If the tribunal treats the mediation window as standard operating procedure, then neither side will need to worry about appearing weak by agreeing to it. And once the mediation window is memorialized in a procedural order, it will be automatic, so neither side will be inclined to hesitate for tactical reasons.
Scheduling the mediation window to immediately follow the early arbitration review is essential. At that point in the proceedings, each side will have just heard a summary of the other side’s case and the tribunal’s questions to both sides. Assuming the decision-makers from each side participated in the early arbitration review, all parties will be up to speed and should be able to rationally analyze the costs and benefits of settling versus arbitrating.
Step Four: Incentivize Arbitrators to Promote Early Dispute Resolution
Finally, arbitrators should be incentivized to always promote the most efficient and economical resolution of the dispute—which may be something other than issuing a final award. The bill-by-the-hour paradigm simply does not serve the parties’ interests. Indeed, it creates the perception of awarding inefficiency. Thus, to preserve credibility of arbitration as the most efficient and economical dispute resolution procedure, the compensation structure needs an overhaul.
A nonhourly compensation structure like the one used by the ICC could potentially hold the answer—if it was used to incentivize efficient early dispute resolution. Article 2(2) of Appendix III to the ICC Rules provides that “[i]n setting the arbitrator’s fees, the [ICC] Court [of Arbitration] shall take into consideration the diligence and efficiency of the arbitrator, the time spent, the rapidity of the proceedings, [and] the complexity of the dispute”, among other things. But even with that flexibility, the ICC rarely compensates arbitrators in a way that puts an appropriate value on a quick, efficient resolution.
Another possibility might be to front-end-load compensation—similar to a law firm requiring a recoupable-but-non-refundable retainer payment.
Different institutions may choose different procedures, but the bottom line is that arbitration institutions would better serve the needs of the parties if they revamped their compensation rules to put the proper focus on efficiency and economy.
Conclusion
To summarize, if arbitrators focus solely on their mandate to issue an enforceable award, they run the risk of overlooking the broader goals of arbitration. The central objective of arbitration is to arrive at a just and enforceable result, through an efficient and economical procedure. In most cases, that result will not be—and should not be—an award. By putting efficiency and economy in the primary position, arbitrators will better serve the parties’ interests and reinforce the credibility and attractiveness of arbitration as the preferred method of dispute resolution.
