What is an Administered Arbitration?

by Rod Germaine

The merits of arbitration are frequently debated. Proponents emphasize the flexibility of the process; the opportunity for the parties to select their adjudicator; the confidentiality of the proceedings; the finality of the award; and, when done right, the relative expedition and cost savings of commercial arbitration over litigation. Opponents often cite regrettably costly and protracted examples of how arbitration should not be conducted. Some opponents are unwilling to trade the benefit of finality for the risk of restricted appeal rights. And, of course, there are disputes that should be determined by a public process. The fact is that arbitration is suitable in many cases, but not in others.

One aspect of arbitration is less widely understood. If the parties have agreed to arbitrate, what are the merits of an administered process? I have heard apparently knowledgeable practitioners ask this question as if to suggest that the services provided by the Centre are the arbitration equivalent of the emperor's new clothes. This is a serious concern to the Centre. My purpose in these comments is to explain that the emperor is fully clothed. Her attire, while fashionable, is not fanciful haute couture!

Just as arbitration is not the method to resolve every dispute, a neutral administrator is not essential to every successful arbitration. Arbitration can be conducted without specialized administrative support. There are arbitral rules, such as the model UNCITRAL rules, which do not contemplate the involvement of an administering body. The rules of the British Columbia Arbitration and Mediation Institute (BCAMI) anticipate very limited need for an administrator. And, parties sometimes agree to modify published rules of procedure, such as those of the Centre, to eliminate any reliance on administrative services.

The absence of a neutral administrator may prove no hindrance for parties with a mature relationship and previous arbitration experience. A lawyer who has a cordial, professional rapport with opposing counsel, for example, may not have difficulty reaching agreement in regards to timelines, procedures or selection of an arbitrator. However, strong stances in respect to clients' positions can result in an inability to see eye-to-eye on process. Each side is likely, often soundly, perceived as acting from a position of pure self-interest. Second-guessing the other side's motives can escalate as each step in the procedure is negotiated. Lack of experience may leave counsel or parties asking: What happens next? When is an exchange of documents to occur? What can be done if the other side doesn't cooperate or reply? What are the "typical" timelines and practices in arbitration? Without a neutral administrator a party will be required to apply to the arbitrator for direction. This can be problematic in that most parties do not wish to appear uninformed or lacking in confidence before the adjudicator. The costs of arbitration will quickly rise if the arbitrator is called in at an hourly rate to define every step of the process and direct inexperienced or combative parties at every interval.

It is also naive to presume that disputing parties will always be able to agree to the appointment of an individual arbitrator. Even cooperative parties regularly ask the question "Where do we find an experienced, qualified, neutral and available arbitrator?" If the parties choose to proceed without administrative assistance, their ultimate recourse will be to the Supreme Court. The irony of this is that the original agreement to arbitrate was probably based on a desire to stay out of court. The Centre has been known to receive an urgent call from one party at the last minute before another party proceeds with a Chambers application to have an arbitrator appointed. On such occasions, the Centre is able to assist the parties in selecting an arbitrator acceptable to both sides without court intervention.

Simply stated, the possibility of arbitrating successfully without administrative services in some cases does not demonstrate that these services are redundant in all cases. What exactly, then, are the administrative services offered by the Centre?

Appointment of the Arbitrator

The most visible service provided by the Centre is the appointment of an arbitrator. In disputes governed by the Commercial Arbitration Act, parties are deemed to have agreed to the Centre's Rules of Procedure for Domestic Commercial Arbitration if they have not stated that other rules will apply. (See section 22 of the Act.) Under these Rules the Centre is available to act as an appointing authority.

The Centre's panel of arbitrators for domestic cases comprises the great majority of experienced, practising senior arbitrators in the Province, as well as experienced arbitrators in every other province. The panel encompasses a full range of expertise: including individuals with backgrounds in accounting , appraising, architecture, agriculture, business valuations, contract law, construction, engineering, fishing, franchising, insurance, intellectual property, leasing, marketing boards, securities, wrongful dismissal and more. It does not include aspiring arbitrators in training. It does include, but is not restricted to, retired judges.

The Centre has great confidence in its panel of experience arbitrators from diverse fields of expertise and usually appoints from this list. The Centre works to know the strengths, backgrounds and styles of those on the panel and provides a shortlist of the most appropriate candidates to hear a given dispute. As an added benefit, however, the Centre also has a wide-range of contacts in a variety of industries who can be consulted when it is necessary to locate an individual with very precise qualifications not held by a panel member (e.g.,when the parties require an accountant with a knowledge of aquaculture.) Because of the role the Centre plays, parties are able to remain anonymous while a search to locate an individual with necessary qualifications is conducted. Just as professional recruiters can take the legwork out of the hiring process, the Centre assists parties in locating an arbitrator.

Further, the Centre's process of appointment enables consensus between the parties. This is accomplished in two ways. First, the parties participate in the final selection. The Centre provides a list of at least four arbitrators with a description of each that includes education, training, experience in arbitration and professional or technical expertise and credentials. The parties are invited to indicate objections and preferences. If the parties' responses do not produce adequate consensus, a second list is provided. The Centre will then appoint. Second, in addition to the parties' involvement, the Centre is obliged to emulate the parties' own choice as far as possible. This is the effect of Rule 14(4), which requires the Centre to:

"observe the qualifications agreed to by the parties and have regard to:

a. the objections and preferences expressed by the parties in the appointment procedure, as well as any additional qualifications requested by a party;

b. the nature of the contract;

c. the nature and circumstances of the dispute; and

d. any other consideration likely to secure the appointment of a qualified, independent and impartial arbitrator. "

Of course, parties who cannot agree on their arbitrator have other choices. They may agree to request the assistance of another appointing body such as BCAMI, which trains arbitrators, to appoint one of its members. Or they may agree to hire a private company (e.g., ADR Chambers) to appoint one of its practitioners. Failing any agreement, the Supreme Court has the power to appoint pursuant to section 17 of the Commercial Arbitration Act. However, so long as the Rules of the Centre apply (see section 22 of the Act), either party may apply to the Centre to appoint. The Centre offers a unique combination of authority and service.

Parties who might otherwise be compelled to resort to the Supreme Court, will find that the Centre affords a demonstrably superior appointment process. Selection will be made from a much wider range of qualified arbitrators than any petitioner is likely to suggest to the Court and will be based on access to information on arbitrator availability and expertise that exceeds what is readily available to a presiding judge. Moreover, the modest fee of $500 or $1500 charged by the Centre is almost certainly less expensive than the costs associated with filling fees and legal representation in Court. And that modest fee includes additional administrative services.

Additional Administrative Services

The Centre's rules specify other formal services that the administrator provides. These distinguish an administered arbitration.

Composition of the tribunal: I have emphasized the Centre's role as an appointing authority, but there is more to this than mentioned above. Both the domestic and international rules enable the Centre to complete the composition of a three person tribunal where a party refuses to appoint its arbitrator, or where the two appointed arbitrators do not select the third arbitrator.

Challenge of an arbitrator: The Centre acts as an appellate body in cases of a challenge to the independence or impartiality of an arbitrator. Under the Domestic Rules, the challenge is first made to the arbitration tribunal. The decision of the tribunal may be appealed to the Centre. Of course, the Supreme Court also has supervisory authority in this regard under s.18 of the Commercial Arbitration Act. But the cost of an application to Court is very likely to exceed the cost of an appeal to the Centre.

Settlement offers: The Centre will hold offers of settlement and, if rejected, bring them to the attention of the arbitration tribunal after it has decided the dispute but before it has determined costs.

Deposits: The Centre will hold and manage deposits as security against the costs of the arbitration. This can be of value to arbitrators who, as consultants or non-lawyers, may not have trust accounts for holding such funds. It is also a service to parties in that they may have an opportunity to review an arbitrator's account and raise any questions prior to payment from deposits. The Centre can act as a buffer between the parties and the arbitrator over the collection and payment of fees. This can be especially important where an arbitrator renders an account for payment or requests further deposits prior to a final award being issued. With an administrator, the arbitrator does not need to directly pursue outstanding amounts from individual parties and a perception of bias will not result from an arbitrator being required to wear a "bill collector's" hat during the proceedings.

Clarity: The Rules of Procedure offer clarity and direction to the arbitration process without requiring it to be rigid and unaccommodating. The Centre determines with certainty the date of commencement of the arbitration. The Rules guide parties as to when statements of case are to be exchanged, provide timeframes for the selection of the arbitrator, and state when to anticipate an exchange of documents and witness statements etc. However, the Centre (and the arbitrator once appointed) is empowered to extend or abridge time periods to fit the circumstances of a particular case. Facilitators at the Centre are available to assist the parties in reaching agreement on process and generally work to identify and establish timeframes that are regarded as reasonable and acceptable to both sides.

Logistical and practical support services

Implicit in the Rules is the concept that an arbitration administered by the Centre will be supported in practical ways. Centre staff are available to arrange meetings and coordinate hearings, book meeting rooms, schedule reporting services, recommend accommodations for out-of-town parties, monitor timetables, and follow up with parties or the arbitrator when deadlines are imminent or missed.

It is often more economical for parties to have these coordinating services provided by the Centre as part of the flat-rate administration fee than by the arbitrator at an hourly rate (or not provided at all.). Arbitration is not the primary career of many effective individuals. Many arbitrators are respected engineers, architects, insurance experts, barristers or solicitors. It is helpful to many arbitrators to have the Centre's staff support their arbitration activities. These services are not imposed upon parties or arbitrators who do not require them.

Still, the value of this form of administrative support is difficult to quantify and is sometimes over-looked. The arbitrator will appreciate it when the Centre's conscientious staff advises that, having discussed the request for a deposit with a party, an objection to the deposit has disappeared. And it is surprising how often the Centre's contact with a party will impact on the party's preparation of its statement of case or compliance with some other requirement or deadline. It may or may not be surprising that contact the Centre's contact with an arbitrator often results in the publication of the award before or within the 60 days specified in the Rules. The Centre's practical support contributes very significantly to an orderly and efficient process.

The "insurance" factor

The Centre has the capacity to act as a channel of communication between the parties and between the arbitrator and the parties. I have alluded to the impetus the Centre lends to the process. But there is another dimension of service that does not arise in all cases, but is critical when it does arise.

Arbitrations commenced in a spirit of cooperation sometimes deteriorate into acrimony. Sometimes they commence in a spirit of acrimony, with the recalcitrant respondent engaging in every tactic to defer and defeat the process. A danger is that the relationship between an arbitrator and one of the parties may become particularly tense. This may be due to a party's sense that it is not succeeding, and its tendency to blame the arbitrator. It may be due to a party's sense that costs are becoming excessive and a reluctance to accede to the arbitrator's requests for deposits. Whatever the reason, the arbitrator will want to take every precaution to maintain even and courteous communications with both parties. The Centre can be of great assistance in this regard. As an intermediary, the Centre can eliminate hazards of misunderstanding and misinterpretation. The Centre can explain the context, the usual practice and the normal expectations in the arbitration process.

The American Arbitration Association administers thousands of arbitrations every year. Here is how its material describes this aspect of an administered arbitration:

The administering entity deals with objections to the continued service of arbitrators, scheduling of hearings, collection and disbursement of arbitrator compensation, and will work with the arbitrators to ensure a timely award. These burdens, in a non-administered system, fall upon the parties, and can produce awkward results.

Does a party want to directly voice its objections to the continued service of an arbitrator? Is it appropriate for an arbitrator to "dun" a party during a case, for overdue compensation? Do the parties want to complain directly to the arbitrators about a late award? These problems are avoided in an administered arbitration system?