American Bar Association Endorses Commercial Arbitration

As a commercial arbitrator, I am sometimes asked by folks—including many lawyers– whether there really are any advantages to resolving disputes through arbitration. I hear, “is it really any better than litigating in court?” I then launch into my elevator pitch on why commercial arbitration is more efficient and cost-effective than court litigation.

Now, however, I can simply cite to the American Bar Association’s conclusion, after an in-depth study, that commercial arbitration is indeed a favored dispute resolution mechanism for business disputes.

On February 22, 2021, the House of Delegates of the American Bar Association, which is the ABA’s policy-making body, passed Resolution 100. The resolution states:

RESOLVED, that the American Bar Association supports the use of arbitration of business-to-business disputes, both domestically and internationally, as an efficient and economical method of dispute resolution.

The ABA’s official endorsement of commercial (or as it termed it, “business-to-business”) arbitration is a major accomplishment. Arbitration in general has received a great deal of negative attention in recent years, in Congress and elsewhere, primarily in the arenas of employment and consumer arbitration. However, commercial arbitration has not escaped criticism. In both the last session and the current legislative session, Congressional bills have been introduced which, if passed, would not only prohibit mandatory employment and consumer arbitration, but would also ban mandatory antitrust arbitration. Because the ABA has a prominent and respected voice in the world of legal affairs, its support of commercial arbitration for the resolution of business disputes is significant.

The resolution was sponsored by the Section of Dispute Resolution, which convened a joint Committee to study the issues, composed of representatives of the Sections of Dispute Resolution, Litigation, Business Law, and Infrastructure and Regulated Industries.

The resolution was accompanied by a report highlighting the rationale for the resolution and the benefits of commercial arbitration.

The ABA report focused solely on commercial disputes and took no position on consumer and employment arbitration. The report stressed that while consumer and employment arbitration has drawn public criticism and debate, the same issues do not arise in the context of business-to-business arbitration. Unlike consumer and employment arbitration, the business disputes that arise in commercial relationships typically do not involve personal claims.

The ABA report concluded that commercial arbitration is increasingly being embraced by the business community because it offers several distinct advantages over court litigation:

1. Commercial and Public Interests are Served: The report found that arbitration of commercial disputes serves not just commercial interests, but the public interest as well. Commercial arbitration frees up judicial time and resources that can be directed to other types of disputes. Commercial arbitration has provided an efficient alternative to businesses during the pandemic in the face of the backlog in the state and federal courts due to court closures.
2. Fairness and Efficiency: The foundation of arbitration is the efficient and speedy resolution of disputes, without the need to deal with crowded court dockets. Businesses value the opportunity to have their dispute resolved more quickly in arbitration than through traditional litigation.
3. Economy: Because arbitration generally proceeds faster than litigation, this translates into cost savings. When the arbitration is efficiently managed by experienced arbitrators, parties can expect a substantial savings in fees and management resources.
4. Knowledgeable Decisionmakers: Businesses appreciate the opportunity to choose knowledgeable decision-makers with expertise in the subject-matter of the dispute. This assures disputants that their decision-makers will understand the factual and legal issues, particularly in highly technical fields.
5. Privacy: Unlike court litigation, arbitration is private, serving the concerns of businesses about public disclosure of confidential, sensitive business information.
6. Party Control: Unlike court litigation, arbitrating parties have the freedom to create their own dispute structure, from how many arbitrators are to serve, what their expertise should be, the scope of the issues subject to arbitration, the applicable procedural rules, and many others. Parties have unlimited flexibility in structuring their dispute-resolution process to the needs of the industry and the particular dispute.
7. Neutral Forum for International Disputes: Arbitration plays a critical role is providing a neutral forum for resolution of international business disputes. This allows businesses to avoid the risk of bias, corruption, language barriers, and unqualified decisionmakers in certain foreign countries.

This critical ABA policy was accomplished with the assistance of several CCA Fellows. As the then-Dispute Resolution Section Chair, Fellow Harrie Samaras garnered support for the resolution within the Section. Fellow Dana Welch served as the Dispute Resolution Section Council Member. Fellow Ed Lozowicki served as Chair of the Joint Committee and Fellows Gary Benton and Mitch Marinello served as members.

*The views expressed are those of the author and do not necessarily reflect the views of CCA or any other organization.