The last two segments of this Small Business B-2-B Arbitration series have focused on certain key structural aspects of pre-dispute arbitration agreements. Perhaps some might think that an examination of even the most basic structural components of arbitration agreements is too much information for a business person, but most successful business people know about all relevant aspects of the contracts they negotiate, not just the basic structural components of those contracts (e.g., price and performance terms).

Given that an arbitration agreement can fundamentally alter the risk-benefit calculus of a deal, one would naturally expect that successful business people would be familiar with at least the basic structural aspects of such agreements, but in our experience that is not necessarily the case. In fact, were it so, we would expect there would be far fewer arbitration-related disputes that could be traced back to a party’s un- or ill-informed decision about whether to agree to arbitrate, and if so, on what terms.

In Part II.B.2(A) we identified three key structural aspects of pre-dispute arbitration agreements and discussed the first—the scope of disputes to be arbitrated—in some detail. This Part II.B.2(B) briefly discusses the second: how an arbitration under the agreement will be administered and by whom.

Ad Hoc versus Administered Arbitration

Both pre-dispute and post-dispute arbitration agreements can be either ad hoc or administered. An administered arbitration agreement is one by which the parties agree to have an arbitration provider – such as, for example, theAmerican Arbitration Association (the “AAA”) or JAMS – administer the arbitration, including disseminating arbitration demands and other notices; scheduling; administering arbitrator selection; and resolving or aiding the resolution of certain types of disputes concerning arbitration-rule compliance; providing hearing facilities; and otherwise administering, or assisting with the administration of, the proceedings. Most or all arbitration providers also have one or more sets of arbitration rules, including ethical guidelines and arbitrator selection procedures, and typically feature stables of arbitrators who have met certain eligibility criteria set by the provider. Naturally, the arbitration provider charges fees for its services, as do the arbitrators themselves.

Generally, if the parties wish to use an arbitration provider, they so specify in their agreement, and identify the provider. If the provider’s rules so state, simply agreeing to arbitrate pursuant to them may be deemed consent to use the provider. (See, e.g., AAA Commercial Rules, R-2.) Parties sometimes specify more than one provider and a method for agreeing how the provider will be selected in the event of a dispute, or provide for an alternative provider in the event the other provider becomes unavailable, as happened when the National Arbitration Forum ceased handling consumer arbitration cases in response to a (now settled) law suit brought by Minnesota’s attorney general in 2009.[1]

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