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Arbitration analysis: Following the American Arbitration Association’s (AAA) revision of their Commercial Arbitration Rules (the Rules), Jason Espersen, associate at the Houston office, Mark Beeley, partner at the London office and Tim Tyler, counsel at the Houston office of Vinson & Elkins LLP, consider the major changes to the Rules and how they will affect cases filed on or after 1 October 2013.
Press release: American Arbitration Association (AAA) launches updated commercial rules
The AAA has issued revised commercial arbitration rules, which take effect on 1 October 2013. One significant change is the addition of a mediation step under which, subject to the ability of any party to opt out of the mediation process, all cases with claims that exceed $75,000 are expected to proceed to mediate their dispute at some time during the arbitration.
The major changes can be summarised as follows.
Mandatory mediation, subject to any party’s unilateral ability to opt out (R. 9):
• for any cases with claims in excess of $75,000, the parties are required to mediate their dispute
• absent party agreement to the contrary, the mediation is to occur concurrently with the arbitration process in order to avoid delaying arbitral proceedings
• any party may unilaterally opt out
Regulation of a preliminary hearing (R. 21):
• a preliminary hearing is to be scheduled as soon as practicable after appointment of the tribunal or sole arbitrator
• the hearing is the parties’ opportunity to discuss logistical issues including the location and timing of hearings, key witnesses, and the discovery process
• the arbitrator then issues a written order reflecting the agreements of the parties or any of the tribunal’s decisions made during the hearing
• the new Rules stress arbitrators should take care not to import procedures from court systems that add to costs and delay arbitration
Streamlining of the discovery process (R. 22):
• the changes give arbitrators greater authority to manage discovery, including electronic information
• arbitrators are to promote efficient and economical discovery while safeguarding each party’s opportunity to fairly present its claims and defences
• when a tribunal is appointed (as opposed to a sole arbitrator), the chairperson is authorised to resolve discovery disputes without the need to consult with the full panel (R. 44)
Dispositive motions (R. 33):
• the new Rules explicitly grant arbitrators the authority to make rulings on dispositive motions
• dispositive motions, or motions seeking to dispose of some or all of a claim prior to the conclusion of the arbitral process, should be granted provided the moving party has shown that the motion is likely to succeed and dispose of or narrow the claims made in the case
• while this practice was previously not uncommon in AAA commercial arbitrations, the new Rules explicitly authorise this practice
Emergency relief (R. 38):
• the new Rules outline the procedure for obtaining emergency injunctive relief
• upon notification by any party, the AAA quickly appoints an emergency arbitrator who develops an expedited schedule to rule on the relief sought
Sanctions (R. 58):
• the new Rules explicitly authorise arbitrators to order sanctions at the request of a party for another party’s failure to comply with orders issued by the tribunal or for the party’s failure to comply with obligations under the AAA Commercial Rules
Remedies for non-payment (R. 57):
• the new Rules expand the tribunal’s options in the case of non-payment by one of the parties
• these options include limiting a party’s ability to assert or pursue a claim or counterclaim (but not to defend a claim or counterclaim)
As a general matter, we consider that the new Rules, including the rules regarding discovery, are in line with other major arbitral institutions—notwithstanding key differences. As with other major institutions, arbitrators are given broad authority to implement or alter the Rules as may become necessary. Hence, the practical effects of the new Rules are still largely dependent on the discretion-based decisions of the arbitrators themselves. Arbitrator selection, therefore, remains critical.
There are several important differences between the Rules and the rules of other major arbitral institutions. See Practice Note: Arbitration procedure—institutional rules (LINK). In addition, there are several works which detail the differences between the Rules and other major institutions, and these differences should not be undervalued.
The AAA views these changes as a response to the needs and suggestions of its users. It remains to be seen, however, whether the revised Rules will drive increased usage of the Rules.
When filing demands for arbitration and counterclaims, practitioners should note that the AAA’s Procedures for Large, Complex Commercial Disputes are applied when the amount in dispute is $500,000 or more excluding attorneys’ fees (absent party agreement to the contrary) (R. 1).
Certain procedural changes have been made with regards to filing an arbitration (R. 4) with the deadline for filing an answer to a demand for arbitration being shortened from 15 days to 14 calendar days (R. 5).
Other deadlines have also been shortened from 15 to 14 calendar days, including:
• objections to locale (R. 11)
• deadline for returning arbitrator selection lists (R. 12)
• deadline to respond to a notice from the AAA to appoint an arbitrator (R. 13)
• deadline by which party appointed arbitrators must notify the AAA about their appointed chairperson (R. 14)
Interviewed by Jenny Rayner.
The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.
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