The Importance of Selecting an Arbitrator with Industry Expertise

Elizabeth Shampnoi
June 5, 2008 — 868 views  
Practitioners in many industries that generate not only large amounts of products, but also large amounts of litigation, have long recognized the usefulness of alternative dispute resolution (ADR) for its efficiency, speed and cost-effectiveness in managing conflict and settling disputes.  

In addition to the obvious benefits of reduced costs and delays, however, one particular advantage of ADR often overlooked for industry-specific cases is the ability of parties to select an arbitrator who has extensive expertise in that industry.

In litigation, one cannot “shop around” to find the most qualified judge to hear a case.  Yet in arbitration (the submission of a dispute to one or more impartial persons for a final and binding determination), the parties have an extensive amount of input into the selection of the “judge” and should take full advantage of this opportunity.  Furthermore, the arbitration process allows parties to select arbitrators with discrete industry expertise, thereby avoiding the necessity of educating the judge and/or jury on a complex matter in a highly technical industry.  This can help streamline the process so that a decision can be reached sooner, because the arbitrator will be able to assist the parties in narrowing the issues to get to the heart of the matter at dispute. 

Realizing that at least minor disputes may be inevitable on a large, complex contract, parties should agree ahead of time whenever possible to place the preferred arbitrator qualifications in the ADR provision contained in the contract.  However, sometimes it is hard when entering into the agreement to see all potential future disputes and to know exactly what you will need in an arbitrator. 

This is where the expertise of a professional ADR provider can be of great service to both parties. In an administered arbitration, prior to the selection of an arbitrator, a case manager is assigned to work with both parties.  The parties can discuss the required expertise of the prospective arbitrator(s) with the case manager.  In addition to classifying the type of professional you would like, parties may also ask for someone with specific job experience (e.g., an attorney who primarily represents clients in that industry, or an active practitioner in the industry).

Determining which range of experience to seek in an arbitrator largely depends on the facts of the case.  If one’s case were based on a legal issue, one would be well advised to select a lawyer that has experience with industry contracts.  On the other hand, if one’s case rests on whether the product was defective, a practioner may be more appropriate.  Often, cases are complex and have issues where both an attorney and industry professional, serving on a three-member panel, would allow the parties to fully benefit.

In addition, in the organization I serve, the American Arbitration Association, a party can specify the geographical area where the arbitrator will come from.  For example, if the contract or project in dispute is highly publicized and politically charged, parties may want an arbitrator from a completely different state.

With the AAA, the parties also have the ability to request a list of arbitrators with specific fee ranges, so they can control the cost of the process.  Arbitrator fees are determined by the individual arbitrator; but are often based on going industry rates, experience and geographical territory. 

Of course, in court the parties do not pay the judge.  While some feel that is a disadvantage of arbitration, there is another way of looking at the cost of an arbitrator’s fees – as compensation for his or her being available to fit your schedule.  When in court, the parties have to work around a judge’s (usually already overloaded) docket when scheduling the trial.  In contrast, in an arbitration proceeding, the parties can determine when they would like to hold hearings and select from a list of arbitrators available at that time.  This is especially beneficial when a dispute arises that affects an ongoing project or contract.

Selecting the right arbitrator is a very important stage in any arbitration – especially one involving a large, complex contractual dispute -- and it is a task that should not be overlooked or taken lightly.  Spending the time to determine what you need in an arbitrator, and working with your ADR provider’s case manager to fulfill that need, is worth the time and effort to get the most out of the process -- and the best way to ensure your desired result.

The American Arbitration Association is a not-for-profit, full-service ADR provider offering dispute avoidance services such as partnering, dispute review boards (DRBs) and on-site neutrals, as well as traditional dispute resolution procedures such as mediation and arbitration. For more information, please contact Elizabeth J. Shampnoi in the New York Regional Office at 212-484-4084 or visit the Association’s web site at www.adr.org.

Elizabeth J. Shampnoi, Esq. is the District Vice President of the New York region for the American Arbitration Association.  She is responsible for business development, education, outreach, special events, and the panel of arbitrators and mediators in the New York Metropolitan area.  Ms. Shampnoi is a member of the bar of the State of New York and of the State of Connecticut. 

Elizabeth Shampnoi

American Arbitration Association