Focus: The American Arbitration Association – a leading provider of commercial dispute resolution services worldwide
By Dr. Maxi Scherer, LL.M., and Dr. Sarah Ganz, M.Jur.
The American Arbitration Association (AAA) is sometimes said to be the largest provider of commercial dispute resolution services in the world: In 2014 alone, it handled more than 223,000 cases. Despite the AAA’s size, users in Germany and other European jurisdictions seem less acquainted with the AAA in comparison to other institutions, such as the German Institution of Arbitration (DIS), the International Court of Arbitration at the International Chamber of Commerce (ICC) or the London Court of International Arbitration (LCIA). This contribution offers a brief introduction to the AAA and its international division, the International Centre for Dispute Resolution (ICDR). Special focus will be placed on the recently revised 2014 ICDR International Arbitration Rules (hereafter the “ICDR Rules” or “Rules”), which contain several interesting and innovative features.
Founded in 1926, the AAA has a long history of providing dispute resolution services. Like other well-known arbitral institutions, the AAA administers rather than arbitrates disputes, providing key services such as assisting in the appointment of arbitrators, arranging hearings and providing sets of arbitration rules that the parties can adopt for their disputes. It also provides mediation services.
Where the AAA perhaps differs from other institutions is in the range of disputes it administers – along with commercial disputes, it also deals with environmental, labor, employment and consumer disputes, to name just a few. For some types of disputes, the AAA provides specialized arbitration rules as discussed in more detail below.
Headquartered in New York, the AAA has 29 offices worldwide, 23 of which are regional offices located in the US. While all AAA cases are filed at the central Case Filing Center located in New Jersey, proceedings can take place anywhere in the US, as agreed by the parties or, in the absence of such agreement, as determined by the AAA (subject to later determination by the tribunal).
Beyond the administration of disputes, the AAA takes a proactive role in advancing the use of arbitration as a dispute settlement mechanism. It promotes the development of arbitration legislation in the US, provides educational and training programs, and designs ADR systems for businesses, government agencies, unions and courts.
ICDR: AAA’s international arm
The ICDR was established in 1996 as the “global component” of the AAA. The ICDR is responsible for the administration of all international arbitrations brought to the AAA.
The ICDR is also headquartered in New York, where it has specialized administrative facilities and staff. While New York is important for many ICDR cases – it being the party-designated place of arbitration in approximately one quarter of cases – the ICDR’s reach extends far beyond the US. It has international offices established via joint ventures with local arbitral institutions, including Mexico City, Singapore and Bahrain, as well as a full-time executive residing in Europe, who is responsible for the Europe, Middle East and Africa region. The ICDR is equipped to provide dispute resolution services in many countries around the world and maintains a panel of more than 500 individuals worldwide who can act as arbitrators. For instance, in 2013, the ICDR administered 1,165 international cases with parties from more than 100 countries, and similar statistics are expected for 2014.
Like other arbitral institutions, the ICDR also has a specialized group for young dispute resolution lawyers under the age of 40 (ICDR Y&I), which regularly organizes educational and networking events around the globe. ICDR Y&I currently has a membership of about 2,000 associates from more than 90 countries.
Today, there is no one set of “AAA Rules.” Rather, there are many different sets of rules, each tailored to a specific type of arbitration – the principal sets being the Commercial, Construction, Employment and Labor Rules. Some rules also include mediation procedures, such as the 2013 Commercial Arbitration Rules and Mediation Procedures. The different sets of AAA rules are mostly used for domestic disputes while international disputes are generally subject to the ICDR Rules.
The ICDR Rules were specifically designed for international settings with the aim to be modern and innovative. Indeed, as explained by John Townsend, former Chairman of the Board of Directors of the AAA, the AAA has used the ICDR Rules as a “laboratory for innovations” (J. Townsend, in Gusy/Hosking/Schwarz, A Guide to the ICDR International Arbitration Rules, 2011, foreword, at page vi). Some of these innovations have subsequently been incorporated into AAA rules or indeed arbitration rules of other institutions. For instance, the ICDR emergency arbitrator procedure which came into force in 2006 was subsequently added to other institutional arbitration rules.
In the ICDR’s continuing spirit of innovation, it issued a major revision of its rules in June 2014 – the most significant to date. The revision further internationalizes the ICDR Rules to dispel any concerns voiced by some that the Rules were too US-focused. For instance, the updated Rules allay fears over the incorporation of US litigation techniques, such as discovery procedures which involve extensive, and thus expensive, exchange of documents between the parties. The new ICDR Rules specifically provide that any document disclosure requests must be limited to documents that are “relevant and material” to the outcome of the case.
The Rules also further increase efficiency of process, one of the main areas of focus of the revision. Indeed, many arbitration users complain that arbitration has become too long and too costly. The ICDR Rules address these concerns in several ways, including with the following revisions:
Tribunal’s mandate: Under the ICDR Rules, the tribunal has both the power and the obligation to ensure that proceedings are conducted efficiently (Art. 20.1 and 20.2). The previous rules already afforded the tribunal specific powers to manage proceedings expeditiously, such as to bifurcate proceedings or exclude irrelevant evidence. The 2014 ICDR Rules advance this further, among other things, by explicitly referring to the tribunal’s power to decide preliminary issues upfront (Art. 20.3) or to draw adverse inferences and allocate costs if parties cause unnecessary delay (Art. 20.7).
International expedited procedures: The Rules also contain a specific “fast-track” procedure for claims up to $250,000. The procedure follows a truncated schedule with specific step-by-step deadlines for the first procedural order, written submissions, hearings and the award. Under this “fast-track” procedure, the tribunal will generally render its final award within approximately six months or less after being appointed. To further speed up the process, disputes of less than $100,000 are normally decided on a documents-only basis, i.e., without any oral hearing.
While some forms of expedited procedures exist in other institutions’ arbitration rules, such as the Singapore International Arbitration Centre (SIAC) and the Stockholm Chamber of Commerce (SCC), the ICDR expedited procedures are unique in that they apply automatically, rather than electively: Unless the parties optout, the expedited procedures apply for all claims below the thresholds specified above.
Shorter timelines: The ICDR has made concerted efforts to have swift timelines for resolution of all of its cases, including those that do not follow the expedited procedures described above. In 2014, the average time for proceedings is 13 months from their beginning to the award or nine months from the constitution of the tribunal to the award. The revised 2014 ICDR Rules have codified these efforts. The default time limit for issuance of an award is now 60 days after the final hearing while many other institutions have longer limits, e.g., six months, or no precise time limits at all, e.g., “as soon as is reasonably possible”.
Consolidation arbitrator: While the basis upon which multiple proceedings may be consolidated resembles that in other arbitration rules, the ICDR Rules are unique in providing a “consolidation arbitrator” to make this decision. The consolidation arbitrator’s powers are quite broad, e.g., he or she can stay any or all of the arbitrations pending the decision on consolidation, and following a decision to consolidate, revoke the appointment of any arbitrators and select one of the previously appointed tribunals to serve in the consolidated proceedings.
This procedure has obvious advantages: The often complex issue of consolidation is decided by an independent qualified third party, which also avoids any conflicts of interest that may arise with an arbitrator that is already appointed making a consolidation decision. However, it also raises some questions, such as the status of the consolidation decision – Is it an award? Or a mere procedural order? – which can have potential ramifications regarding the challenge, recognition and enforcement of the consolidation arbitrator’s decision. With the Rules being in force for less than a year, there is limited practice as to the appointment of consolidation arbitrators, but it will be interesting to see how this novel feature will be used and applied in practice.
The AAA constitutes one of the major arbitral institutions worldwide. In particular, owing to its international division, the ICDR, it is an institution with appeal beyond the US. The 2014 ICDR Rules contain several innovative and distinguishing features to be considered by arbitration users worldwide. While their suitability will of course always depend on the specific circumstances, it is not just these features that make the ICDR Rules an interesting alternative to other established arbitration rules.