EDNA SUSSMAN (esussman@

sussmanADR.com) is a principal
of SussmanADR LLC and is the
Distinguished ADR Practitioner in
Residence at Fordham University
School of Law. She is the Chair-
Elect of the Dispute Resolution
Section of the New York State Bar
Association. Formerly a partner at
a leading international law firm,
she serves on the arbitration and
mediation panels of many of the
principal dispute resolution institu-
tions, including the AAA, ICDR,
CPR, WIPO and FINRA and the
mediation panels of the federal,
state and bankruptcy courts in
New York.

Why Arbitrate? The

Benefits and Savings
By Edna Sussman

C
hoice – the opportunity to tailor procedures to business nificantly reduce costs and provide for a much speedier
goals and priorities – is the fundamental advantage of resolution than can be found in court.
arbitration over litigation.1 Flexible Process – As arbitration is a creature of contract,
Much has been written in recent years about whether the parties can design the process to accommodate their
arbitration has become so much like litigation that arbi- respective needs. Hearings may be set at the parties’ con-
tration’s most commonly cited benefits – saving time and venience and the less formal and less adversarial setting
money – no longer pertain. One author, writing in a recent minimizes the stress on what are often continuing busi-
issue of the New York State Bar Association Journal, sug- ness relationships.
gested that the cost of the arbitrators’ fees makes litigation Subject Matter Expertise – Arbitration permits the par-
the less expensive alternative for resolving commercial ties to choose adjudicators with the expertise necessary to
disputes.2 Response to this and other criticisms requires decide complex issues that often require such industry-
a review of the many benefits of arbitration, a look at the specific expertise.
empirical data on the speed and cost of arbitration, and a Finality – Judicial review of awards is restricted to
summary of the mechanisms available to the parties and very limited issues. The finality of awards is particularly
their counsel to control costs and increase efficiency.3 important in business transactions. In many instances,
with the cost of capital and the paralysis that indecision
Why Arbitrate? can bring to businesses, the most important consideration
Benefits in a commercial dispute is that it be quickly and defini-
The many benefits of arbitration have led to the extensive tively decided.
use of arbitration as the process of choice for dispute reso- Confidentiality – Arbitral hearings, as opposed to court
lution in commercial disputes. These include: trials, are generally private, and confidentiality can be
Faster and Cheaper – As is discussed at greater length agreed to by the parties. Most arbitral institutions have
below, arbitration is the parties’ process. The parties can specific rules regarding the confidentiality of proceedings
craft and implement a streamlined procedure that can sig- and awards. This is an important feature for many cor-

20 | October 2009 | NYSBA Journal

porations, particularly when dealing with disputes over By contrast, as reported for 2008, the median length
intellectual property and trade secrets. of time for civil cases resolved through trial in the U.S.
District Court for the Southern District of New York was
International Arena 30.7 months for jury cases and 27.0 months for non-jury
Certain additional features of arbitration in the interna- cases, a number in line with most other federal district
tional context are of particular importance: courts.7 The median length of time from filing in lower
Cross-Border Expertise – Arbitration permits the parties court to disposition in the Second Circuit for cases that
to choose adjudicators with the necessary expertise to were appealed was 43.1 months.8 The Bureau of Justice
decide the dispute. Such special expertise can include an Statistics reports that for state court contract cases in the
understanding of more than one legal tradition – such as 75 largest U.S. counties, the average length of time from
common law, civil law or sharia law – an understanding case filing to trial in jury cases was 25.3 months and for
and ability to harmonize cross-border cultural differences bench trials 18.4 months.9
and fluency in more than one language. Thus as compared with both U.S. federal and state
Neutrality – In the international context, arbitration court systems, arbitration affords a significant time sav-
provides a neutral forum for dispute resolution and ing for the vast majority of cases. Indeed the average case
enables the parties to select decision makers of neutral appears to reach resolution three to five times faster in
nationalities who are detached from the parties or their arbitration. And it must be noted that many international
respective home state governments and courts, in a court systems are considerably slower than those in the
setting in which bias is avoided and the rule of law is United States.
observed. Counsel expenses and fees are the most significant
Enforceability – In the international context, a critical cost of litigation. Inevitably, a longer process requires the
feature is the existence and effective operation of the New expenditure of additional lawyer time as it creates oppor-
York Convention to which over 140 nations are parties. tunities for additional discovery and motion practice. The
The Convention enables the enforceability of interna- abbreviated schedule in most arbitrations usually results
tional arbitration agreements and awards across borders. in significant cost savings.
It significantly limits the grounds for refusal to enforce
an arbitration agreement or award, making it possible to Is Arbitration Really Cheaper?
enforce an award even in a jurisdiction that might oth- The reduced cost available in arbitration has historically
erwise find ways to favor its domestic party. In contrast, been viewed as a principal reason to favor arbitration
judgments of national courts are much more difficult and over litigation. It is true that access to the courts is essen-
often impossible to enforce abroad. tially free while arbitration has some costs associated
Thus, even apart from the lower cost and greater with it – i.e., the cost of the administering institution if
speed, many parties choose arbitration for dispute resolu- one is selected and the cost of the arbitrator(s) – but these
tion for one or more of these other benefits. must be viewed in light of the total cost of the proceeding,
including counsel fees and the other costs of preparing
Is Arbitration Really Faster? a case. While there appear to be no definitive statistical
The availability of a process that is quicker than a court studies comparing the costs of arbitration with litigation
proceeding has long been a principal reason for the in commercial cases, through informal comparisons and
selection of arbitration for dispute resolution in business anecdotal evidence arbitration appears to be generally
transactions. The statistics support the long-held belief cheaper.10 Certainly it is a process that can be streamlined
that arbitration is a mechanism for achieving speedier by the parties.
dispute resolution. The American Arbitration Association Only a small part of the total cost of arbitration goes
(AAA) reports that for its business-to-business cases in for the fees and expenses of the arbitrators and the tribu-
which awards were rendered in 2008, the median length nal, the “additional” cost of arbitration. The International
of time from the filing of the demand to the award was Chamber of Commerce reported that 82% of the costs
238 days or 7.9 months.4 The AAA’s international arm, incurred were what the parties spent to present their case,
the International Centre for Dispute Resolution (ICDR), including lawyer fees and expenses, expenses related to
reports that for its cases in which awards were rendered witnesses and expert evidence, and other case prepara-
in 2008, the median length of time from the filing of the tion costs.11 Thus, arbitrator and institutional charges
demand to the award was exactly 365 days or 12 months.5 were only 18% of the cost of the arbitration. And it should
The International Institute for Conflict Prevention and be noted that the costs for case preparation and presenta-
Resolution (CPR) reports that for its domestic and inter- tion are much more easily controlled in arbitration than
national cases combined in which an award was rendered in litigation.
in 2008, the median length of time from the filing of the In litigation one is subject to the Federal Rules of
demand to the award was 347 days or 11.5 months.6 Civil Procedure or parallel state court rules that allow for

NYSBA Journal | October 2009 | 21

broad discovery, including both document discovery and arbitration process, counsel can consider contractually
depositions. Typically, discovery is a very costly part of limiting document discovery, barring or limiting deposi-
trial preparation, and it can be burdensome to the par- tions, providing for fast-track procedures (such as limit-
ties as well. Document discovery is generally more lim- ing the length of time from appointment of the arbitrators
ited in arbitration; depositions are either dispensed with to hearing and from the hearing to award), providing for
altogether or are severely limited in number. Extensive “baseball arbitration,” limiting the matter to one arbitra-
motion practice is commonplace in court but is much less tor at least for smaller disputes, excluding judicial review
common and, in fact, usually discouraged in arbitration. where that is permissible, and taking care to draft an arbi-

If the parties jointly seek to extend or complicate the

arbitration, they may obstruct the arbitrator’s ability to
achieve efficiency goals.
Court cases require more counsel time for preparation tration clause that will not provide grounds for a court
and trial than is the case with arbitration. For example, challenge as to its application. The selection of appropri-
trial-related matters not pertinent to arbitration include ate governing rules can make all the difference and can
evidentiary issues, voir dire and jury charges instruc- set up the time limits and other procedures desired. In
tions, and proposed findings of fact and law. Appeals selecting the arbitral institutional rules that will govern,
from trial court decisions are commonly filed, a process they should be reviewed to make an informed choice.
generally unavailable and, in any case, very unusual in Unless the parties want a lengthy proceeding, counsel
arbitration.12 All of these additional costs must be fac- should not provide for the application of the Federal
tored into any consideration of the costs of arbitration. Rules of Civil Procedure or the Federal Rules of Evidence.
This suggests that arbitration can be, and generally is, Of course it takes two to tango, and this contractual
much less expensive even with a paid adjudicator. approach to limiting dispute resolution timing and costs
only works if agreed to by all parties.13
What Can Parties Do to Make Arbitration Choice of Institution – Examine the rules of the provider
Faster and Cheaper? institution selected, if the matter will not be ad hoc, in
While a good arbitrator will manage the arbitration to deciding which is most suitable. The rules of the institu-
expedite the proceeding and minimize costs, the parties tions vary. Some have rules that promote more expedi-
and their counsel can have a determinative role and in all tious and less costly resolution.
cases they play a significant part in establishing the tim- Choice of Counsel – Retain counsel who understand
ing and costs for the matter. Arbitrators can “jaw-bone,” the interest in efficiency and cost savings and who are
set schedules, emphasize efficiency and cost saving, and experienced in arbitration. Selecting counsel who are
work with the parties to streamline the process, but they accustomed to litigation and see all cases as best tried
are required to follow the terms of the arbitration agree- with a “leave no stone unturned” attitude can lead to the
ment. If, for example, the arbitration agreement estab- conversion of the arbitration into a litigation-like process,
lishes extensive litigation-like protocols, the arbitrator especially if all parties subscribe to that view.
must follow them. If the parties jointly seek to extend or Choice of Arbitrator(s) – Select an arbitrator who (1) is
complicate the arbitration, they may obstruct the arbitra- experienced in case management and has the ability to
tor’s ability to achieve efficiency goals. conduct the pre-hearing procedures efficiently; (2) is
There are many steps counsel and parties can take available to deal promptly with pre-hearing issues, hear
to assure time and cost savings; much is in their hands. the case in the near term, and deliver awards without
Efficiency and cost are not always the parties’ principal undue delay after the hearing; and (3) has the ability to
goals in arbitration, however. But if speed and cost saving move hearings along.
are objectives sought by the parties, attention should be Choices on Discovery – Do not seek extensive docu-
devoted to carefully addressing the many choices avail- ment discovery; eliminate depositions altogether or limit
able, including the following: them to one or two per party. If one party opposes broad
Contract Provisions – Counsel are increasingly com- discovery, it is much easier for the arbitrator to set tight
ing to recognize the importance of tailoring the dispute limitations, as he or she is not faced with “the parties’
resolution clause to the specific needs of the situation process” and right to choose. Provide that a single arbi-
and are no longer simply inserting the “standard clause” trator be authorized to rule on discovery issues.
at midnight. In order to assure a speedy and less costly Continued on Page 24

22 | October 2009 | NYSBA Journal

Continued from Page 22
Conclusion
Any system of dispute resolution, whether arbitration or
Choices on Pre-Hearing Issues – Don’t make motions litigation, will have its outliers, the cases that run amok,
other than those as to such threshold issues as the juris- and it is easy to point to those to support a negative view.
diction of the tribunal or the statute of limitations. Work However, any realistic analysis must look to the function-
cooperatively with opposing counsel to minimize the ing of the overall system and the unique ability the parties
matters that must be brought to the arbitrator for resolu- have to craft a process that meets their needs. If cost and
tion. time savings are important to the parties, arbitration pro-
Choices on Scheduling – Pick as early a date for the hear- vides a mechanism for achieving those goals. Litigation
ing as is realistic and consistent with the level of prepara- may have many other virtues but it simply does not offer
tion the case merits based on client goals – and stick to it. the parties the opportunity to tailor the process to meet
Rescheduling a hearing can often cause a lengthy delay as those objectives. ■
it can be difficult to find dates on which all participants
1. Thomas J. Stipanowich, Arbitration and Choice: Taking Charge of the “New
are available. Litigation,” 7 De Paul Bus. & Comm. L.J. 3 (forthcoming 2009), available at
Choices for the Hearing – The conduct of the hearing can http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1372291.
be expedited by (1) presenting direct testimony by affi- 2. Ronald J. Offenkrantz, Arbitrating Commercial Issues: Do You Really Know the
davit; (2) limiting the time available for the hearing and, Out-of Pocket Costs? N.Y. St. B.J. (Jul./Aug. 2009), p. 30.
if appropriate, using the “chess clock method” to assure 3. This article focuses on commercial disputes. Consumer and employment
equal time; (3) using telephone and video conferencing arbitration which has been controversial in recent years and has been the sub-
ject of numerous studies and articles is beyond its scope.
technology; (4) choosing a hearing location that minimizes
4. E-mail from American Arbitration Association on file with author.
expenses to the parties; (5) conferencing or “hot tubbing”
5. E-mail from the International Centre for Dispute Resolution on file with
the experts; (6) using a single expert to advise the arbitra- author.
tors rather than having the parties offer competing experts; 6. E-mail from the International Institute for Conflict Prevention and
and (7) limiting post-hearing submissions. Resolution on file with author.
7. Judicial Business of the United States Courts 2008 Table C-10, available at
What Else Is Being Done to Make Arbitration Faster http://www.uscourts.gov/judbus2008/contents.cfm.
and Cheaper? 8. Id. at Table B-4A.
Current criticisms of arbitration – that it is neither speedy 9. Civil Justice Survey of State Courts, Bureau of Justice Statistics 2005, available at
nor cost-effective – largely stem from two issues: the http://www.ojp.usdoj.gov/bjs/pub/pdf/cbjtsc05.pdf.

submission to arbitration of sophisticated business cases 10. Susan Zuckerman, Comparing Cost in Arbitration and Litigation, 62 Disp.
Res. J. 42 (2007). An anecdotal study in which three construction litigators and
of significant monetary value and the advent of globaliza- arbitrators concluded that litigation was 27% more expensive than arbitra-
tion with the resulting increase in complex cross-border tion even assuming that several depositions were taken in the arbitration and
disputes. Counsel and parties have in recent years chosen excluding the costs of appeals in a court proceeding.
to handle some of these matters in a manner that has led 11. International Chamber of Commerce Commission on Arbitration,
Techniques for Controlling Time and Costs for Arbitration, available at http://www.
to their falling within time frames and cost structures iccwbo.org/uploadedFiles/TimeCost_E.pdf.
more akin to litigation than arbitration. These cases have
12. See, e.g., Hall St. Assocs. v. Mattel, Inc., 128 S. Ct. 1396 (2008). Some institu-
led some to question the efficacy of arbitration. tions provide for an appellate process with a panel of arbitrators but parties
The arbitral institutions have been responsive to the have not commonly availed themselves of this option. For example, CPR
established rules for an appellate process with a panel of three arbitrators in
criticism and are devoting significant attention to foster-
1999, but the process has never been used by any party.
ing speedier and cheaper arbitration proceedings by pro-
13. For a discussion of the many issues a careful drafter should consider in
mulgating rules, guidelines and protocols14 intended to drafting the dispute resolution clause, see Stipanowich, supra note 1; John
help parties select a more efficient process, and to provide Townsend, Drafting Arbitration Clauses: Avoiding the 7 Deadly Sins, 58 Disp.
a concrete, rule-based protocol for the arbitrator to resist Resol. J. 28 (2003).

burdensome party requests. Educational programs for 14. See, e.g., AAA Commercial Arbitration Rules. Expedited Procedures; ICDR
Guidelines for Information Exchanges in International Arbitration; JAMS Streamlined
arbitrators now often emphasize the ways in which the Arbitration Rules and Procedures; CPR Protocol on Disclosure of Documents
arbitrator can facilitate an efficient hearing. To meet the and Presentation of Witnesses in Commercial Arbitration; ICC Commission on
criticism head on, the College of Commercial Arbitrators Arbitration, supra note 11; IBA Rules on the Taking of Evidence in International
Commercial Arbitration.
is holding a national summit in October 2009 for all
constituencies to come together to discuss and vote on a
series of concrete, practical protocols.
In short, the institutions and the arbitrators are step-
ping up to the challenge of preserving the time- and
cost-saving advantages of arbitration. However, it takes
parallel motivation and action by parties and counsel to
achieve the goal.

24 | October 2009 | NYSBA Journal