USMCA Update: Rules of Origin and Dispute Resolution

After many years, Mexico, USA, and Canada successfully negotiated and replaced NAFTA (North America Free Trade Agreement), implemented in 1994, with USMCA (United States-Mexico-Canada Agreement), which took effect on July 1, 2020.

USMCA’s Chapter 4 addresses the rules of origin, an important topic for industries like automotive as well as construction. Rules of origin are the criteria used to determine the national source of a product, and will determine whether specific components are free of duties or subject to custom fees. In this regard, companies that use goods with several components are tied to the rules of origin.

Production chains are also affected because producers need to verify that the materials used in the goods comply with the rules of origin. If materials do not comply, producers will need to decide whether to pay customs fees or to use some other suppliers that comply with the rules of origin.

Another issue addressed is the way to solve any dispute related to the interpretation and application of USMCA. USMCA’s Chapter 31 creates a dispute resolution system which strives to operate under the principle of cooperation. Under such basis, a Party may request “Consultations” under Article 31.4, which is a procedure where a Party that feels USMCA is being applied unjustly and/or in an anticompetitive manner by another Party can notify the other Party in writing of the reason for the request and legal basis for the complaint. USMCA requires the Parties to make every attempt through cooperation and consultations to arrive at a mutually satisfactory resolution. If the Parties do not arrive a resolution through the consultations, they can start the procedure to establish a Panel to make findings, determinations, and recommendations.

On this basis, in August 2021, Mexico requested USMCA consultations with the United States to solve a dispute over differing interpretations of the automotive rules of origin. 

The dispute relates to how the United States was calculating the Regional Value Content (RVC) for an automobile’s core parts to fulfill the rules of origin. Core parts of an automobile must have a 75% RVC to qualify as having USMCA origination.

Mexico argued that the United States’ interpretation imposes strict requirements inconsistent with considering a core part qualify as originating as long as it satisfies the 75% RVC requirement. This interpretation could make products cost more due to import duties and be less attractive than competitor markets.

The consultations did not resolve the dispute. For that reason, on January 6, 2022, Mexico requested a Panel, which under Article 31.9 consists of five members and may render findings, determinations, and recommendations regarding the differing interpretations. Canada recently announced that it would join Mexico in requesting the Panel. A decision is expected around September 2022. Although this dispute only relates to automotive rules of origin, it may affect all manufactured goods.

 Author Juan Pablo Sandoval: jpsandoval@comad.com.mx.

Should You Use the DRB or Go Straight to Arbitration?

Dispute Resolution Boards (“DRBs”) continue to grow in popularity, particularly for major infrastructure projects. As such, we can expect that construction lawyers will increasingly be advising clients on whether to send a dispute to the DRB or go directly to arbitration. In this post, we outline a few of the factors that may inform whether your client should submit a dispute to the DRB or go straight to arbitration.

DRBs (also known as “Review Boards”) are most common in major infrastructure projects. They typically consist of three independent and impartial experts, such as engineers. Lawyers can also make up the DRB. The DRB is actively involved in the project from its inception so its members are familiar with the parties and need little time to get up to speed on the events leading to a dispute.

When disputes arise, the parties may refer it to the DRB. The DRB will then typically investigate the dispute, hear submissions from each side through an informal process, and render either a binding or a non-binding opinion, depending on the nature of the DRB. The precise process followed by a DRB depends on the terms of the applicable contract.

DRBs usually play a very important role in major projects by dealing with issues as they arise on site. By providing prompt decisions, they allow construction projects to proceed without delay. Real-time prevention and resolution by the DRB often promotes open communication, trust, and cooperation between the parties.

When considering whether to refer a dispute to the DRB, clients may be concerned that most DRB decisions are non-binding recommendations. There is a risk the parties will still need to arbitrate (or even litigate) after a DRB recommendation is rendered. Fortunately, it appears that the vast majority of disputes resolved by DRBs do avoid further dispute resolution steps.¹

However, DRBs may also have some downsides. In Canada, there are reports that parties are increasingly seeking a lawyer to chair the DRB committee because of their knowledge of legal processes.² The emphasis on legal procedure may erode the cost and time-saving benefits of the DRB while leaving the parties without the benefits of arbitration, such as finality of the decision.

Moreover, the nature of the dispute may not be within the DRB members’ expertise. While members of the DRB with engineering expertise may be well positioned to adjudicate technical disputes, claims involving contract interpretation and other legal matters may be outside their expertise. Such disputes might be better left to an adjudicator with legal training.

Parties should also consider whether they will end up arbitrating or litigating related disputes. In one high profile project involving the construction of a subway station in Toronto, Canada, one dispute was resolved through the DRB but over 40 individual claims are still being litigated.³ If the parties are already incurring the expense of complex litigation, there may be little benefit gained by hiving off one issue for a separate hearing through the DRB.

The DRB’s heavy involvement in the project can sometimes be problematic too. Depending on the relationships that form on site, parties may benefit from the fresh perspective of an arbitrator who is new to the project. An arbitrator may alleviate any concerns about bias from members of the DRB who have worked on site for months or years.

Overall, DRBs are usually an excellent option for resolving disputes in real time on site. However, it is still important to weigh the other dispute resolution options carefully before choosing to proceed with the DRB.

Author Laura Brazil is a partner in the Toronto office of McMillan LLP. Her practice is focused on construction and real estate disputes. She primarily acts for owners and contractors but also represents subcontractors, material suppliers, designers and other members of the construction pyramid.

Author Anthony Labib is an articling student in the Toronto office of McMillan LLP. He is a graduate of Western University’s Faculty of Law.

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1 “Construction Dispute Resolution Arbitration and Beyond”, American Jurisprudence Trials, August 2021 Update, by Thomas H Oehmke and Joan M Brovins.^↩
2 https://canada.constructconnect.com/dcn/news/government/2019/10/dispute-resolution-board-use-on-the-rise-in-canada.^↩
3 Walsh Construction Company Canada v. Toronto Transit Commission, 2020 CarswellOnt 8055, 2020 ONSC 3688.^↩

Improving Arbitration By Private Right of Appeal

The belief that there can be no appellate remedy for erroneous arbitration awards is widespread but mistaken. Granted, the Federal Arbitration Act (FAA) and many state arbitration statutes provide limited judicial relief from a final arbitration award.¹ Indeed, the FAA does not allow for any judicial appellate review of an award, even by agreement of the parties.² However, neither the FAA nor state arbitration codes prohibit parties from contracting for the right to a full appellate review of an arbitration award, on the merits, via a private panel of appellate arbitrators. On the contrary, parties have the right to agree to this option in their original arbitration contract or by written stipulation at any time after a dispute arises.³

Parties may be surprised to discover that they need not sacrifice the finality, cost savings or speed of arbitration by preserving their appellate rights. The appellate rules established by JAMS, AAA and CPR – although each slightly different – generally empower the parties to design a fast, cost effective and final process, with many advantages over judicial appeals. 

For example, the finality of JAMS appellate review may surprise those who fear the delays of vacatur or remand as the reward for reversal of judgment on appeal. Instead, JAMS procedures prohibit remand for further hearing or “retrial” and limit the appellate panel’s authority to affirming, reversing or modifying an award.⁴ Even if a panel re-opens the record to receive any evidence excluded in error, at most, the panel will issue a new, final award.

Brevity of the time necessary for this appellate process is not only baked into the short deadlines proscribed by the applicable rules, but may be furthered by the parties’ agreement to shorten deadlines, limit briefing or waive oral argument. Additionally, in the right case, the parties can save time and expense by agreeing to an interlocutory appeal of a key issue, such as which party is in breach or the existence of insurance coverage, before incurring the – possibly unnecessary – additional expense of proving the amount of damages.

Further cost savings may result if the parties follow the lead of the European Court of Arbitration,⁵ by having a single arbitrator decide the underlying case, subject to the right of a subsequent review on the merits by three highly experienced, specially chosen appellate arbitrators. Obviously, using one arbitrator to manage and hear a dispute will significantly reduce the cost of the underlying arbitration, which cost savings will be much less than the fees for the appellate panel, which meets relatively briefly. 

The right of the panel and parties to customize the appellate process itself is another plus: arbitration appeals need not follow any hard and fast rules. The parties and panel may agree to several hours of oral argument. The panel may request additional information after initial briefing or argument, including submission of clarifying evidence to supplement the record. If the parties want the results of the appeal to be confidential outside the confines of the arbitration, that usually can be agreed to as well.

In summary, by assuring the review of awards finally, quickly, inexpensively, and fairly, by a hand-picked tribunal with specialized knowledge and experience, “… appellate arbitration enhances the benefits of arbitration itself.”⁶

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1 See e.g., Patton v. Signature Insurance Agency, Inc., 441 F.3d 230, 234 (4th Cir. 2006). Additionally, in Hall Street Associates, LLC. v. Mattel Inc., 552 U.S. 576 (2008), the U. S. Supreme Court limited vacation of an award to statutory grounds such as “evident impartiality”, “fraud”, “corruption”, refusing to hear “pertinent and material” evidence, and acts exceeding the powers of the arbitrator. Note, however, some states have statutory arbitration procedures, promulgated as alternatives to litigation, which allow for judicial appeals of the resulting award judgments. See e.g., Florida Statutes, 44.104, which preserves the parties’ appellate rights to the state intermediate appellate court, although the scope of review is limited to essentially legal rather than factual issues.^↩
2 Hall Street Associates, supra.^↩
3 For a scholarly discussion of the legal bases for contractual, legislative and other ways of overcoming concerns about the limited standards of review allowed for most arbitration awards, see Philip L. Bruner, The Appeal of Appellate Arbitration, in 35 INTERNATIONAL LAW REVIEW, Pt. 4, 436, 444 et seq. (2018) (“Bruner”). For example, JAMS suggests the following model contract provision: “The Parties adopt and agree to implement the JAMS Optional Arbitration Appeal Procedure” with respect to any arbitration award “arising out of or related to this [arbitration] agreement”. JAMS Comprehensive Arbitration Rules and Procedures rule 34 also allow parties to “agree at any time” during an arbitration to adopt the JAMS optional appellate procedures as an optional remedy in that proceeding. CPR and the AAA have their own, slightly different model contract language and rules.^↩
4 Thus, providing a remedy for the lament voiced in Enforcement of the Arbitration Award and Limited Rights of Appeal, in ARBITRATION AND THE SURETY, 79, 80 (A. Belleau, et al. eds. Am. Bar Ass’n 2020), that after vacatur of an arbitration award, the remedy is often no better than a costly “do over”.^↩
5 See, Attempts to Set Aside an Award, in THE PRINCIPLES AND PRACTICE OF INTERNATIONAL COMMERCIAL ARBITRATION, 216, 217 (Margaret L Moses, 3rd ed. 2017).^↩
6 Bruner, p. 448.^↩

Author Patricia H. Thompson, Esq., FCIArb, is  a full-time neutral at JAMS, with experience conducting virtual and in-person mediations, arbitrations and other ADR proceedings in construction and other complex commercial disputes.

What to become a AAA Arbitrator / Mediator? But don't know how? Join Us on June 30th at 3PM ET

Have you ever thought about what it would take to serve as a Construction Arbitrator or Mediator? Do you think you have to wait until the end of your career to pursue an ADR Practice? You don’t. Most arbitrators on the American Arbitration Association (AAA) Construction Panel still maintain a full-time practice. 

On June 30th, Division 1 (Litigation & Dispute Resolution) is teaming up with the AAA, Construction Litigation Committee of the ABA Section of Litigation, and the Forum's Diversity + Inclusion Committee for a virtual program on how you can design your career path to have a successful neutral practice.  Our panelists from the AAA, Forum/D1, and CLC will discuss what it takes to be an arbitrator or mediator with the AAA's Construction Panel, give tips for building the type of experience that the AAA looks for and offer insight and advice for building a successful ADR practice. Understanding that parties often seek diverse viewpoints in dispute resolution, the AAA has made a concerted effort to attract and mentor diverse arbitrators and mediators. During this session, the Panelists will discuss the training and continuing education offered by the AAA to its panelists, as well as its mentoring program.

It is never too early to start planning your career goals and aspirations.  We hope you join us for this discussion.  There will be time for questions at the conclusion of the program.  

REGISTER

Questions about this program or Division 1 in general, contact me, Tom Dunn, Division 1 Chair, at rtdunn@PierceAtwood.com.  

Hear from the Pros: Using Zoom for Pre-Mediation Activities to Achieve Earlier Settlements

In the 2020 Winter issue of Under Construction, two of our D1 members, Paul M. Lurie and Robyn L. Miller, discussed Using Zoom for Pre-Mediation Activities to Achieve Earlier Settlements. As they mentioned in their article, most construction disputes settle and are therefore not adjudicated by courts or arbitrators. We decided to pick their brains a bit more on effective settlement strategies from the perspectives of an ADR neutral and attorney: 

Why are pre-mediation activities important for earlier settlement?

Paul:  Settlement impasse issues should be identified and dealt with long before the start of any settlement negotiation. Traditional mediation in commercial cases often does not identify impasse issues until the start (or middle) of the mediation session where settlement is also discussed. Guiding Mediators are trained to understand and overcome the wide variety of impasse issues. The mediator’s ability to diagnose causes of impasse is enhanced due to a mediator’s ability to leverage confidentiality. Impasse issues are always about more than money. They include anger, missing parties, fear of public knowledge of settlement, need for discovery, insurance, and expert opinion differences.  The pre-mediation session should not involve any negotiations. This creates a much more collaborative atmosphere for addressing impasse issues.

Robyn:  In addition, pre-mediation activities make the mediation itself more efficient.  In a traditional mediation, each party sits with their attorneys and, perhaps, experts in a room alone while the mediator goes room to room to gain introductions and understand the positions of the counsel and parties.  Pre-mediation activities avoid wasting one party’s time while the mediator is being introduced to other parties. Using Zoom or similar platforms is an especially good means of allowing the mediator to meet one-on-one with the parties and get a good understanding of the people and their positions prior to the start of mediation itself. 

Can you provide us with an example of diagnostic and remedial processes?

Paul:  I was hired as a mediator to resolve a dispute between a City and its contractor, who was responsible for replacing windows in a historic governmental building. The City was not happy with the contractor’s original installation and its inability to prevent water penetration. The contractor had a fix which the City rejected. The City wanted a much more expensive fix, so the City was also withholding the contract balance due to the contractor, which was causing financial problems to the contractor. In their assignment of the case, the AAA described the dispute only as being about the amount of money due to the contractor. After my confidential discussions, it was clear that the impasse was more based on a technical dispute between the City’s expert and the contractor concerning the design of a fix. 

In the spirit of the diagnostic and remedial process, I asked each party to nominate three contractors who could understand the problem. From the six names, I chose a president of a contractor who also had an architect’s license. That architect then presided over meetings between the parties until both a fix was agreed upon as well as a method to delivery the money to the contractor after such fix. While the architect had never mediated before, he became my “co-mediator” and the case settled.

How is the construction industry well-served by Pre-mediation?

Paul:  Pre-mediation is part of the design of a mediation process. It assumes that there are multiple phases to the mediation, one of which is preparation for overcoming impasse before the start of the settlement negotiations. Again, the Pre-mediation phase does not include any settlement demands or offers. Instead, Pre-mediation activity builds trust in the mediator and overcomes resistance to their early hire. When hired early, the mediator is best able to avoid expense and delay in settlement.  Pre-mediation also involves the parties’ collaborative efforts to provide the information parties need to evaluate whether settlement or litigation is in their best interest. This information significantly reduces the expense of using discovery to prepare for ultimate adjudication, if necessary.

Robyn: Pre-mediation helps the construction industry by increasing the likelihood of successful and efficient settlement. With more timely settlements, owners, contractors, and designers can minimize their “investment” in litigation or arbitration and focus their resources on new projects and opportunities.

Is there standard language to include in a contract related to Pre-Mediation?

Robyn:  Pre-mediation does not require any change of language in the standard form of construction or design contracts. The parties should only need to hire mediators who know when and how to the use the tools of Guiding Mediation, including the use of Pre-mediation.

What are examples of “nudges” from the mediator that may fulfill the needs of the parties before they are willing to consider change of settlement position?

Paul:  Here is an example: the mediator might suggest a meeting of experts, who are creating large disparities in the respective parties’ offers and demands, due to their disagreement over liability and/or damages. This discussion between the experts, sometimes referred to in adversarial proceedings as “hot boxing,” is considered confidential and, therefore, what is said is not admissible in litigation or arbitration.  As a result, the experts can adjust their positions without having to concede that they are wrong in an open session. The benefit to this “hot boxing” is that if they are able to reduce their dollar differences, it will make it easier for the parties to change their positions and make more agreeable offers and demands.

How effective is the use of virtual platforms, like Zoom, for Pre-mediation activities if the actual mediated settlement negotiations will occur in person?

Paul:  Virtual platforms are great for the kinds of Pre-mediation activities described above which are a necessary precursor to settlement negotiations.  Live settlement negotiations may involve direct personal confrontations creating emotions and fears which make it difficult to overcome impasse. Virtual discussions can avoid these situations. This can result in a more collaborative atmosphere that reduces the time and expense of activities, such as furnishing information needed by parties, 

Robyn:  Virtual meetings are much easier to arrange than in-person meetings because they avoid the time, expense, and coordination required to get lawyers, parties, and experts in the same physical location for the purpose of meeting to agree on the mediation process.  Pre-mediation also allows the mediator to spend the amount of time needed with each party to prepare for an effective in-person mediation session because the mediator will have had the time to meet the parties, their counsel, and experts in advance of the mediation. In addition, virtual Pre-mediation meetings provide an even greater opportunity to diagnose barriers to settlement which, inevitably, makes the in-person mediation be more successful.

What do you believe mediation will look like in the coming years?

Paul:  Most construction disputes settle before judgment or award because at some point parties agree that a settlement, rather than adjudication, is in their best interest. Most of the expense in dispute resolution is incurred when lawyers and experts prepare for litigations or arbitrations that will never occur. The expense and delay of such preparation can be reduced by using collaborative processes to determine what information – fact witnesses, discovery, or expert testimony – is needed to satisfy the parties so that they have the information needed to overcome impasse. Using virtual Pre-mediation conferences is the best way to agree on these collaborative processes. 

Robyn:  Given the inefficiency of traditional mediation, as well as the time and cost savings associated with Guiding Mediation, I anticipate that Guiding Mediation will eventually be the standard  – and I look forward to that day!

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Contact Paul M. Lurie: pmlurie@early-dispute-resolution.com.

Contact Robyn Miller: Robyn.Miller@crtkl.com.

Editor Lexie Pereira is a third year J.D./M.B.A. candidate at Boston College Law School and Carroll School of Management, studying to become a litigator with a specialty in construction law. This summer, she will be joining Pillsbury Winthrop Shaw's DC office as a Summer Associate. Contact Lexie: pereirle@bc.edu.

Servotronics, Inc. v. Rolls-Royce PLC: What the U.S. Supreme Court’s Upcoming Decision on 28 U.S.C § 1782 Means for International Construction Arbitration

On March 22, 2021, the U.S. Supreme Court announced that it would consider the hotly contested issue of whether 28 U.S.C. § 1782 (“Section 1782”) grants parties to international commercial arbitrations seated outside the United States the right to seek U.S.-style discovery from the federal courts. The Supreme Court’s decision in Servotronics, Inc. v. Rolls-Royce PLC will ostensibly put to rest a matter that has roiled the international arbitration community for the last several years and may have profound implications for modern international arbitration practice.

Given the role international arbitration serves in connection with international construction projects, construction practitioners and industry representatives should pay close attention to the Supreme Court’s upcoming decision. The following article seeks to introduce the current debate to construction practitioners and offer some insight into what the Supreme Court’s decision may mean for the field of international construction arbitration.

28 U.S.C. § 1782 and the “Foreign or International Tribunal”

Section 1782 is a procedural device that permits an applicant to petition the U.S. courts to order document disclosure or compel testimony “for use in a proceeding in a foreign or international tribunal.” As a result, Section 1782 is a potentially powerful tool to gather evidence in the United States for use in a proceeding located abroad. This is particularly true for international arbitration proceedings where document exchange practices are significantly more constrained than in U.S. discovery.

Importantly, Section 1782 does not define the phrase “foreign or international tribunal” and the question of whether the statute applies to international commercial arbitral tribunals seated in jurisdictions outside the United States has caused a circuit split.  Specifically, case law dating back to the late 1990s from the Second and Fifth Circuits answered this question in the negative and remained unchallenged for two decades.  However, in 2019 the Sixth Circuit reached the opposite conclusion in the case of Abdul Latif Jameel Transp. Co. v. FedEx Corp., 939 F.3d 710 (6th Cir. 2019) and held that the phrase “foreign or international tribunal” in Section 1782 encompassed private commercial arbitral tribunals seated abroad.

The latest iteration in this saga arrived in March 2020 and September 2020 when the Fourth and Seventh Circuits, respectively, reached opposite conclusions on precisely the same set of facts in the case of Servotronics. As explained below, the Fourth and Seventh Circuit’s inconsistent holdings only broadened the circuit split and almost necessarily required the Supreme Court to review the matter.

Servotronics, Inc. v. Rolls-Royce PLC

Servotronics arose from a fire that occurred during a ground engine test of a Boeing 787 in Charleston, South Carolina. (In re Servotronics, Inc., No. 18-CV-7187, 2019 WL 9698535, at *1 (N.D. Ill. Apr. 22, 2019), aff'd sub nom. Servotronics, Inc. v. Rolls-Royce PLC, 975 F.3d 689 (7th Cir. 2020), cert. granted, No. 20-794, 2021 WL 1072280 (U.S. Mar. 22, 2021).) Rolls-Royce, the engine manufacturer, settled with Boeing and then sought indemnity from Servotronics—the entity that manufactured an engine valve that Rolls-Royce alleges caused the fire. (Id.) Accordingly, pursuant to an arbitration agreement between Rolls-Royce and Servotronics, Rolls-Royce initiated arbitration in London under the arbitration rules of the Chartered Institute of Arbitrators (more commonly referred to a CIArb).

 

In connection with those proceedings, Servotronics filed an application under Section 1782 in the U.S. federal district court for the District of South Carolina seeking testimony from Boeing’s employees that resided in South Carolina. In addition, Servotronics also sought document discovery from Boeing pursuant to Section 1782 through a separate ex parte application in the U.S. federal district court for the Northern District of Illinois. (Id. at *2.)

The federal district court for District of South Carolina initially denied Servotronics’s application. (Servotronics, Inc. v. Boeing Co., 954 F.3d 209, 211 (4th Cir. 2020).) However, on March 30, 2020, the Fourth Circuit Court of Appeals reversed the lower court’s decision. After reviewing the language and legislative history of Section 1782, the Fourth Circuit concluded that Congress intended the phrase “foreign or international tribunal” to encompass private commercial arbitral tribunals seated abroad and applied the broader interpretation of Section 1782 espoused by the Sixth Circuit. (Id. at 216.)

In the Northern District of Illinois, the court initially granted Servotronics’ application, but later vacated its decision after Rolls-Royce and Boeing intervened in the case. (2019 WL 9698535 at *3.) The district court concluded it lacked the authority to grant Servotronics’ request because the London-based arbitration proceeding between Servotronics and Rolls-Royce was not a “proceeding in a foreign international tribunal” within the meaning of Section 1782. (Id.) Servotronics subsequently appealed the decision to the Seventh Circuit court of appeals.

On September 22, 2020, the Seventh Circuit affirmed the lower court’s decision.  In doing so, it rejected the conclusions the Fourth Circuit reached on the very same set of facts just sixth months prior.  The Seventh Circuit made two significant findings.

First, according to the Seventh Circuit, neither the plain language nor the statutory context underlying Section 1782 supported an interpretation that “foreign or international tribunals” included foreign commercial arbitral tribunals. Instead, according to the Seventh Circuit, Section 1782 the term “foreign or international tribunal” only encompassed foreign courts and quasi-judicial agencies. (Servotronics, Inc. v. Rolls-Royce PLC, 975 F.3d 689, 695 (7th Cir. 2020), cert. granted, No. 20-794, 2021 WL 1072280 (U.S. Mar. 22, 2021).)

Second, the Seventh Circuit raised concerns over a potential conflict with the Federal Arbitration Act. (Id. at 695–96 (7th Cir. 2020).) Specifically, the Federal Arbitration Act only permits arbitration panels—but not parties—to seek third-party discovery. By contrast, if Section 1782 were read to apply to foreign private arbitrations, litigants in a foreign arbitration proceeding as well as any other “interested persons” (as set forth in Section 1782) would have access to much more expansive discovery than would otherwise be the case in U.S. seated arbitrations governed by the FAA. (Id. at 695.)

Implications of a Supreme Court Decision

Given the circuit split, and with similar cases pending in the Third and Ninth Circuits, the Supreme Court’s decision to consider the issues presented in Servotronics is not surprising. However, depending on whether the Supreme Court sides with the Fourth and Sixth Circuits or Second, Fifth, and Seventh Circuits, the decision could broaden the otherwise narrow document exchange practices commonly used in international arbitration proceedings.

One of the defining features of international arbitration is its relatively narrow approach to document exchange and similarly limited access to third-party discovery. Should the Supreme Court follow the Fourth and Sixth Circuits, it seems likely that the U.S. courts will become ripe for Section 1782 discovery requests. Moreover, given that applications made under Section 1782 are governed by the discovery standards set out the Federal Rules of Civil Procedure, parties to international arbitration proceedings may very well may gain access to U.S. discovery practices that would not otherwise be available in international arbitration. As a result, construction practitioners may have to rapidly adjust how they procedurally and strategically approach international construction arbitrations going forward.

 

Ultimately, the future of Section 1782 practice is far from certain. Even if the current legal framework associated with Section 1782 shifts as the result of a Supreme Court decision, the U.S. courts and international arbitral tribunals will retain significant discretion over the breadth and viability of document requests under Section 1782. As a result, notwithstanding the current focus on the Supreme Court, much remains to be written about Section 1782 in practice. In the meantime, international construction arbitration practitioners should pay careful attention to the Supreme Court in Servotronics and consider what strategic implications the Court’s decision in that case may have on the current international arbitration practices.

Author Hailey Barnett is a senior associate in the Construction Practice Group at Troutman Pepper in Atlanta. She concentrates her practice in construction transactions and construction related disputes before U.S. courts and arbitral tribunals. She can be reached at Hailey.Barnett@troutman.com.

Author Zach Torres-Fowler is a senior associate in the Construction Practice Group at Troutman Pepper in Philadelphia and New York. He concentrates his practice in construction related disputes and specializes in complex international and domestic arbitration proceedings. He can be reached at Zach.Torres-Fowler@Troutman.com.

Neutral Evaluation Mediation Agreements

Often parties select a mediator with deep knowledge of the subject matter in dispute, only to conclude that the typical mediation format does not afford them the best use of the mediator’s expertise. As an alternative, in the right case, neutral evaluation may be exactly what parties need to position their controversy for resolution. This hybrid technique combines neutral analysis with a mediator’s proposal.

This process is intended to be used when the parties have come to a seemingly unshakeable impasse during traditional mediation of a complex case, such as a construction dispute in which each party charges the other with material breach of contract, resulting in respective damages calculations millions of dollars apart. The mediator should be experienced and respected in the area of law at issue and knowledgeable about how to conduct this type of dispute resolution. Rather than declare an impasse, the neutral continues as mediator, but in that role, assumes responsibility to “hear” and analyze the facts of the case and provide an informed, nonbinding evaluation and settlement recommendation as to the issues defined by the parties.

The mediator is provided with each party’s evidentiary presentation in an informal, mini-trial format, over a one to two-day hearing, structured by the parties however each side thinks will best present the essence of its case in the time allotted. Experts may be hot-tubbed; evidence may be provided via summaries, narratives or power point presentations; and post-hearing argument may be oral or written.

At the close of the mini-trial, the parties decide whether to go back to mediation or confirm that the mediator issue a written analysis and settlement recommendation. Assuming the parties want a neutral assessment, the mediator then issues a nonbinding, confidential analysis of the issues submitted for evaluation and a settlement recommendation based on that analysis.

Then, if the parties do not accept the mediator’s settlement recommendation, the parties may declare an impasse. Or the parties and the mediator go back to mediation, assuming the agreement and any necessary waivers by the parties under the applicable ethical rules allow the mediator to continue in that role after disclosing his or her opinions on the issues in dispute and settlement.

This approach has proven remarkably successful in providing parties the information they need to settle matters in which they were previously far apart or in deep disagreement as to likely outcome. It allows parties to obtain a non-binding, independent, but well-informed opinion of the case. This may be especially useful if party decision makers- such as public entities or the parties’ insurers - do not attend mediation or require strong support for settlement in ranges not previously authorized.

This strategy for neutral dispute resolution may raise concerns under the applicable ethical rules, including those requiring mediator neutrality. However, these concerns often may be allayed, in the right circumstances, with appropriate disclosures and consents.

Author's Note: With recognition to Ken Gibbs, JAMS, whose writings and practice define the best in mediation-evaluation.

Author Patricia H. Thompson, Esq., FCIArb, is  a full-time neutral at JAMS, with experience conducting virtual and in-person mediations, arbitrations and other ADR proceedings in construction and other complex commercial disputes.

Drafting a Better Arbitration Agreement to Stay Out of Court

A recent five-year, ten-state study proved that effectively managed arbitrations save time and money in comparison to litigation. This study found that federal court lawsuits lasted over a year longer than arbitrations decided during the same period, which delay caused direct business losses exceeding $10 billion, in part due to lost management time, the effect of prolonged litigation uncertainty on management decision-making, credit and investor concerns, and lost use of resources tied up by litigation. Delayed dispute resolution is simply bad for business.

Therefore, parties wisely draft their arbitration agreements to limit discovery and motion practice, and, equally important, they carefully select arbitrators trained to run efficient proceedings.

But more forethought is necessary for arbitration to live up to the cost savings it was intended to achieve. Too often, arbitration is delayed – sometimes for years – pending judicial resolution of allegedly ambiguous arbitration provisions. Drafters of arbitration agreements should consider the following to avoid, or at least limit, expensive side litigation.

    1.    Clearly define the scope of the arbitration agreement.

To avoid litigation, the arbitration agreement should make clear:

        a)    That its scope applies to all disputes or controversies arising out of or related to the relationship of the parties or the transaction at issue, including statutory, tort, equitable, common law or contract-based claims, including those arising before as well as after the arbitration agreement;

        b)    That objections to the scope and validity of the arbitration agreement and the underlying contract must be arbitrated; and

        c)    Whether it binds entities related to the contracting parties, whether it requires consolidation of all related disputes to avoid multiple, parallel proceedings, and whether it precludes class actions.

    2.    Define the arbitrator’s authority.

The arbitration agreement should leave no question as to the arbitrator’s authority.  It should:

        a)    Give the arbitrator sole authority to determine whether the parties have satisfied conditions to arbitration, as well as the enforceability of the underlying contract(s) and arbitration agreement, and the scope of the arbitration agreement; and

        b)    Clarify that the arbitrator has broad authority to award damages, injunctive and other equitable remedies, and assess fees, costs and sanctions.

    3.    Draft a fundamentally fair agreement.

One-sided or unconscionable arbitration agreements invite litigation. Organizations like JAMS and AAA are good resources for provisions that are clearly worded, fairly drafted, and commercially reasonable.

    4.    Avoid inconsistent contract terms.

Litigation results when language in boiler plate arbitration agreements conflicts with other standard provisions in the underlying or related contract documents. Commonly inconsistent provisions concern:

        a)    Choice of law and availability of remedies;

        b)    Inapplicable references to courts and judicial venues for dispute resolution; and

        c)    Confusion as to selection or number of arbitrators or arbitral rules.

In summary, a well drafted arbitration agreement should foster the cost-effective resolution of disputes, using language that is consciously crafted to avoid rather than result in litigation.

Author Patricia H. Thompson, Esq., FCIArb, is  a full-time neutral at JAMS, with experience conducting virtual and in-person mediations, arbitrations and other ADR proceedings in construction and other complex commercial disputes.

Meet D1's Neutrals - Daya Naef

We are excited to introduce Daya Naef for this month's Meet D1's Neutrals feature! Daya is an experienced arbitrator and mediator, with over 20 years of practice. She attended Loyola University New Orleans School of Law studying Civil Law and International Law. We sat down with her, virtually, of course, and asked for her to tell us more about her mediating style and to share practical tips with our fellow ‘dispute resolvers.’ D1, Meet Daya!

 DAYA'S MEDIATION PRACTICE

When and why did you choose to become a mediator?

As early as law school, I was interested in learning a more direct route to dispute resolution than what seemed like the very tedious and complicated route through litigation.  When I graduated, however, family law was the only mediation certification you could get, so I decided to hold off. I started my law practice in New Orleans right after Hurricane Katrina in 2005. Having grown up in the construction industry, I already had subject matter expertise in what was an important subject at the time. Since then, construction has been my focus in both the practice of law and now, since 2012, in the practice of alternative dispute resolution.

I had been using dispute resolution in my practice, but it was not until I was taking time off from practice, while recovering from a major car accident, that I did my 40-Hour Certification and joined the Mediatory Registry in Louisiana. Coming back, I knew I wanted to do more ADR and less traditional litigation. Now I have done over 200 hours of certified training, both nationally and internationally, and I can say I'm pretty well-versed in what's new in the world of mediation.

Can you describe your mediating style?

My purpose and my goal is to get the project back on track. So, my practice is more of an extended pre-mediation where we're not usually together in a room, or Zoom room. Instead, it's more facilitative. I strive to work out as much as possible between the parties before we have an actual “sit down.” The way that I approach things is to resolve them with the parties. For instance, contractors and subcontractors have a lot of friction getting jobs completed. I get their information and see where the commonalities are so that we can keep the job moving or, if it is at completion, work it out so that the parties part as professionals who are able to work together again. Or should they choose to not work together again, then I hope that they part from a better position – a position of completeness – not with animosity where it's going to be gnawing on them and making them want to badmouth the other person after the process.

Do you have a standard mediation practice regarding pre-mediation exchange of information/memorandum and joint sessions?  If so, what is it?

Once we all agree we're going forward with the objective of getting the project back on track, I have the parties make individual statements on an audio recording, either on the phone or Zoom recording (or write a written statement if they prefer), and have them send it to me. I then have them upload the contracts, pictures of what's going on, and any other statements that they want to take. I peruse this information and bring myself up to speed on the job with the goal of finding out (1) where they are on the job, (2) what their commonalities are, and (3) where their sticking points are. Then I go back and interview them separately to see where we can make more alliances. Again, my goal is to keep the job going.

If there are still some sticking points after those two conversations, and especially if there's a job-stop pending, then we schedule a time to get on Zoom together. On Zoom, I go over the things that we have accomplished so far and then the things that we haven't accomplished yet. Believe it or not, at this point, it is pretty smooth sailing getting to a resolution between the parties since we all agreed on that objective from the beginning. So, then my work is done until a new dispute arises. 

What is a common mistake you see parties and/or their counsel employ in mediation and what steps do you recommend to avoid it? 

A mistake I see with parties is that they either do not take it seriously or do not understand the value of actually having a dispute resolved in this alternative manner. As a society, we are litigious-minded and we see going to court as a ‘thing.’ As dispute resolvers, we have the ability to remind parties that they have the power to make their own decisions, with someone who is a neutral third-party holding the space from them when making those decisions. Reminding parties that it often is just not practical to go to court and that there are other options is very important. 

I've been doing surveys over the last year or so the find out different construction companies' legal budgets. The data suggests that there is a certain threshold where a company hires a general counsel. I would encourage those that are not yet there to think about the alternative solutions. For example, I have encouraged some of my clients to consider hiring a project neutral or a pre-engaged dispute resolution professional for the duration of the project. I'm also working with D1's Toolbox talks, enlisting some examples from our D1 members who are using Early Dispute Resolution as In-House Counsel. Be looking out for that event January 28, 2021!

What is the most important skill to have as a mediator?

Listening skills, seeing the big picture, and creating an environment for people to pause, be listened to, and be heard. Sometimes in the fast-paced world of construction, you have to get people out of their hamster wheel a little bit and say, “okay, look, I am really here to listen to you, but need you to help me help you.” So, I guess it is like being part mediator, part social worker. Also, cultural sensitivity skills, especially in this virtual era, are important. It is best to avoid culture shock when “Zooming” into different areas of the country by going slowly and adjusting to the norms.

How can ‘dispute resolvers’ better resolve disputes?

Gaining a comfort with working on video and using technology are important skills for 'dispute resolvers.' We've gone from typewriters and dictaphones to fax machines and email to now Zoom conferences. There are great benefits to this new technology, especially in terms of real-time document sharing, that I think everyone should get on board with (if they're not already!). I’ve been on a committee in the DR Section putting together an info-video for attorneys and their clients to get familiarized with what a Zoom mediation looks like and what they can expect. That should be out by the Spring meeting. Stay tuned.

How does the Forum and Division 1 relate to your arbitration practice?

I've had the best time being in the Forum. I've been to the meetings in Nashville, Philadelphia, and Chicago, as well as New Orleans. My first Forum experience was when the meeting was in New Orleans, I think it was 2006 or 2007, right after Hurricane Katrina. I had just started my law practice there and someone actually reached out to me and said that they'd waive my conference fees if I came because I was a young woman professional member who just started practicing. The meeting was just great. I joined Division 8 because I was interested in learning more about construction internationally. Afterwards, we all went to dinner at Delmonico's private room, and just had a ball. I could not believe that I was so young and new to practice, and yet had the opportunity to meet some of the some of the stars of the Forum at the time. Since then, I've gotten more involved with the ABA. I’m serving a second term as co-chair for the Women in Dispute Resolution (WIDR), as well as being one of the liaisons between the Forum on Construction Law and the DR Section.

So, the Forum has clearly served as a resource for my development. There are certain members that if I have a question or somebody needs a referral, I literally just hop on LinkedIn messenger and send them a message. Similarly, , in a matter of minutes, I can find an attorney in San Antonio for something because I've met someone through the Forum. The Forum has built a community, or like a fraternity, of the legal practice that we don't always get anymore. We have such a diversity of practice now, too. The Forum is all over the country and we do all these different things. It's so amazing.

What hobbies, activities, or interests do you do outside of work and the Forum? 

I'm an artist. It's a pretty dedicated hobby. I've gone to art school and studied in Italy, D.C., and New York. I draw with charcoal and pencil, usually figure studies. So, yes, that's nude people. Sometimes people think that's weird, but it does come from the classics – Michelangelo, Leonardo da Vinci – classical art school, as opposed to modern art school. I love it.

_____________________________________________________________

As the litigation and dispute resolution division of the Forum, our members regularly serve as arbitrators, mediators, and other neutrals who resolve disputes. In an effort to promote and educate our membership about our talented neutrals, D1's Incoming Chair, Tom Dunn, decided to spearhead a series here on The Dispute Resolver blog to feature our Division 1 Neutrals (email him at rtdunn@pierceatwood.com if you'd like to be featured!).

__________________________________________________________

Daya J. Naef, Esq. is a third-generation member of the Construction and Real Estate industries. At an early age she gained experience working with her family’s residential construction company and was in close contact with relatives working as realtors, brokers, interior designers, developers and commercial contractors. When she decided to pursue her legal career, specializing in construction was a natural fit. She has represented general contractors, subcontractors, suppliers, owners, developers, condominium associations, property managers, design professionals, agencies, associations and municipalities/non-governmental organizations in Michigan since 1999, and Louisiana since 2005.

Daya has a stellar reputation for seeing a job through from start to finish. She is proficient in drafting and reviewing construction contracts, preparing and filing liens/releases and bond/insurance claims. In addition, Daya can handle business formations, office and site set-ups, real estate transactions, title opinions or reviews, compliance audits, municipal and state taxing issues, board complaints and multi-party mediation or arbitration. Daya can also serve as a project neutral or independent decision-maker.

Because of the depth of Daya’s knowledge of construction law and her excellent communication skills, her clients know what to expect in terms of time, outcome and cost. By choosing Daya Naef, LLC as your consultant, mediator, arbitrator, or legal service provider, you will gain reliable expertise and excellent service.

Contact Daya: daya@dayanaef.com | 504.669.1020

_____________________________________________________________

Editor Lexie R. Pereira is a third year J.D./M.B.A. candidate at Boston College Law School and Carroll School of Management, graduating in Spring 2022 and studying to become a litigator, with a specialty in construction law. Currently, she works as a Law Clerk at Consigli Construction Co., Inc., serves on the Editorial Team of the ABA’s Forum on Construction Law’s Dispute Resolver blog, and acts as the 2020 Student Liaison of the ABA's Forum on Construction Law. At school, Lexie is the President of the Real Estate Law Society and the President of the Eagle-to-Eagle Mentoring Program. Lexie grew up in the construction industry and has spent time working as an estimator, field engineer, laborer, and, of course, in the legal capacity at Consigli and formerly at Hinckley Allen as a Summer Associate. 

Contact Lexie: pereirle@bc.edu | 407.782.2717 | https://www.linkedin.com/in/lexie-pereira/

Mexico: Step by Step Toward a Range of ADR Options

The United Nations Convention on International Settlement Agreements Resulting from Mediation, also known as the Singapore Convention on Mediation, entered into force a month ago. The Convention applies to agreements that result from a mediation of a commercial dispute where at least two of the parties are in different States or that the obligations resulting from the settlement are to be performed in a different State from where the settlement agreement is rendered.

According to the United Nations Treaty Collection, by October 15, 2020, there were 53 signatories, including nations like Chile, Colombia, United States of America and Uruguay; and 6 member states parties to the convention (Belarus, Ecuador, Fiji, Qatar, Saudi Arabia and Singapore). As a Mexican law practitioner, the question is: How is Mexico doing in the area of ADR?

An issue in Mexican contractual relationships, especially in the construction industry, is the way to resolve conflicts.  Regardless of the size or amount of the project, there are generally several parties that look only to their own interests and lose sight of moving the project forward.

Mexico belongs to the civil law system which means that legal relationships are ruled, most of all, from the written law, and even when arbitration has been implemented, the practice is tied to traditional litigation to solve disputes. Additionally, jurisdictional procedures are very formalistic regarding practices like the value of the evidence (most documentary evidence shall be original or certified copy), inter alia.

The use of arbitration has been increasing considerably in complex construction, infrastructure and energy sectors which brings the certainty that a professional in the field who is familiar with the day-to-day in the construction industry will resolve such a specific dispute, rather than a judge whose expertise and knowledge in law would be invaluable, but who would not be necessarily an expert in construction.

Notwithstanding the foregoing, arbitrating during the construction project does not provide a real solution because, in general, arbitration focuses on who wins and who loses, rather than the main objective of the project and its correct performance.

It is worth mentioning that it is not my intention to undermine arbitration. I am a happy practitioner and a lover of arbitration; however, to be honest, arbitration is not always the best ADR option taking into account that in the construction industry, one of the most important objectives is to continue with the projects and avoid unnecessary suspensions or delays in the project.

For those reasons it is necessary, at least in the construction industry, to implement in contractors a culture in which the contractors themselves are the ones who actively participate in the resolution of disputes arising from the contracts to which they are a party.

In that regard, once again the question that needs to be answered: How is Mexico doing in the area of ADR?

An initiative of law has been submitted in the Mexican congress. This initiative is to render an Alternative Dispute Resolution Law, which has as its purpose a social one (as communitarian or indigenous and scholar mediation) but not exactly a commercial one (for commercial mediation is proposed to amend several articles from the Commercial Code). However, if it is approved, it will be the first step to a conciliatory culture and will have a direct impact in the commercial, and of course, construction field.

It is the job of Mexico’s young practitioners to search for new areas in which to innovate, looking around at different experiences like the Peruvian where “Dispute Boards” were used in the Pan-American Games project, helping to avoid unnecessary delays and to carry on the project in a healthy manner, and to try to reach and implement advanced ADR techniques specifically in the construction industry such as the Dispute Boards, where a board of 1 or 3 people resolve in a very quick way, technical disputes, without stopping or delaying the project and eroding contractual relationships, and its resolutions are, depending on the format of the Dispute Board, enforceable.

There seems to be a long way to go, but Mexico has taken the first step by submitting the initiative of Alternative Dispute Resolution Law. I hope that Mexico will get there, step by step, to a place where a range of ADR options are available not only through legislation but also in the contracting culture.

Author Juan Pablo Sandoval García is an Associate at COMAD S.C. (www.comad.com.mx). His email address is jpsandoval@comad.com.mx.

 

Sign up for Tomorrow's Building Results Construction Law and Networking Virtual Program

Register: https://www.americanbar.org/events-cle/mtg/web/405628927/

This Division 1 Planned Program will start tomorrow (10/20) at 5PM ET with an excellent Division 1 panel discussion about the practice of construction law and ADR for law students.

The second half of the program will be networking with law students, members of the ABA Forum on Construction Law and members of the Construction Litigation Committee of the ABA Section of Litigation.

We will have two 15-minute zoom networking breakout rooms with an excellent group of discussion group leaders.  

Thanks to our panel members (shown above) and planning team members (Chris Sullivan, Lexie Pereira, Roy Wagner, and MJ Torres-Martin) for their work to put this program together.  

Is Arbitration on the Briefs Right for your Client?

As clients increasingly demand options for timely, efficient dispute resolution, attorneys need to stay apprised of all available alternatives. Private arbitration was developed with efficiency in mind and has become wildly popular in the construction industry, providing parties a means to avoid delays caused by backlog in state and federal court dockets as well as evidentiary and procedural formalities. The American Arbitration Association’s Fast Track Procedures within the Construction Rules further trim the usual arbitration procedures, pushing parties through a streamlined pleading and discovery process. However, even the AAA Fast Track Procedures require significant time and resources, primarily those invested in conducting a hearing before an arbitrator.

Submitting a case for decision on briefs alone, without presenting in-person evidence or argument to the adjudicating body, is common in appellate litigation. It is also frequently used in trial court-level litigation, sometimes without the parties’ consent. Parties agreeing to arbitration on briefs alone, however, is exceedingly rare. Yet, when employed in the appropriate situation, agreeing to submit a dispute to an arbitrator on briefs alone can be a useful tool for quick and efficient dispute resolution and a highly satisfied client. On major construction projects, the commitment to arbitrate certain matters is often made before a dispute arises. So, when is arbitration on the briefs the right choice for your client’s project? And, what can you do to ensure a successful resolution? Let’s explore.

Arbitration on the briefs has two primary benefits. First, it can be highly cost-effective. Eliminating the costs associated with witness and hearing preparation and presentation can significantly reduce the overall price tag of arbitration. Second, arbitration on the briefs provides for speedy dispute resolution without sacrificing equity or expertise. Again, jettisoning a hearing can expedite a final resolution on the merits by weeks, if not months; certain disputes may even be submitted for a decision on the briefs without a traditional discovery process, which all practitioners know can be extremely time-consuming. Furthermore, the arbitration agreement allows the parties to dictate the timeline for decision, eliminating uncertainty and facilitating easy mid-project or mid-term dispute resolution.

Foregoing a hearing is not without its downsides. Without a hearing, an arbitrator may miss or misunderstand certain complex factual issues, and the parties have limited opportunity for clarification. Thus, astute construction attorneys will recognize that arbitration on the briefs is not one-size fits all. Predicting the nature of disputes likely to arise on your project and the evidence necessary to resolving those disputes is critical in 1) deciding whether arbitration on the briefs is appropriate for your client’s project and 2) drafting the terms of such an arrangement. When considering an agreement to arbitration on the briefs, keep in mind the following tips for success.

Identifying the Issues Subject to Arbitration. Not all disputes lend themselves to resolution on written arguments alone. For the same reasons decisions without a hearing are regularly issued in an appellate court setting, an arbitrator’s decision on the briefs is most successful when the dispute is straightforward and turns on a few narrow questions if not a single, objective issue. Lay witness and/or subjective evidence-heavy fact patterns and other, more complex disputes may be difficult for an arbitrator to grasp on paper alone and key details may be lost without an opportunity for the arbitrator to ask questions. Conveying witness credibility and evidentiary context may also be difficult. Accordingly, disputes involving competing expert testimony are not well-suited to resolution by this method. By contrast, a foreseeable, single-issue quarrel that requires either interpretation or application of a contract clause to a limited factual scenario is easily decided with limited party input. For example, in an agreement based primarily on unit prices, disputes over adjustments to unit prices may be well-suited to arbitration on the briefs. Adjustments to unit pricing are often necessitated by either 1) market fluctuations or 2) significant changes to the quantity of units subject to the agreement. Hence, few subjective factual issues will compound a dispute over the equity of an adjustment to an agreed unit price. Design ambiguity controversies and cost-only change order disputes may also lend themselves to resolution through arbitration on the briefs, particularly when employed mid-project to mitigate damages resulting from postponing a final resolution.

Careful Clause Drafting. Once you have identified the types of disputes amenable to arbitration on the briefs, your arbitration clause should carefully identify and describe those disputes to be subjected to arbitration. In addition, the language should plainly outline the particularities of the arbitration process itself. Each condition applied to the process should promote swift and cost-effective adjudication. Contemplate the following terms when developing an agreement to arbitrate without a hearing:

Arbitrator Selection. Before agreeing to arbitration on the briefs, consider the qualifications an arbitrator needs to provide a speedy and fair resolution. Ideally, an arbitrator should be able to jump into a dispute with minimal education on the intricacies of the particular dispute. In pricing disputes, an arbitrator with an accounting or financial background might be valuable. Alternatively, in a design ambiguity scenario, an arbitrator with architectural or design expertise will require less explanation to understand the parties’ respective positions and reach an equitable decision. To avoid wasting the expediency provided by arbitration on the briefs, the parties should also delineate explicit terms as to how a candidate pool will be developed and how the arbitrator will be selected in the event the parties cannot agree.

Specific Timeframes. As discussed above, a timely resolution of your dispute is a principal benefit of arbitration on briefs alone. Thus, the parties should settle on hard and fast deadlines for brief submission and the arbitrator’s decision. If needed, a limited timeframe for seeking clarification or enforcement of the arbitrator’s decision should also be employed.

Evidentiary Limitations. Your arbitration agreement should place strict limitations on the type and volume of evidence each party is permitted to submit in conjunction with its brief. Disputes that may be decided on objective, empirical, and/or documented evidence will find the most success in arbitration without a hearing. This is not to say that no fact witness testimony should be admitted; a successful arbitration on the briefs provision will permit submission of an affidavit or similar sworn statement to verify documentary evidence and provide necessary project details to put the dispute in context. Still, the primary source of evidence submitted to the arbitrator should be documentary, not testimonial. Taking it a step further, restricting evidence included in the briefs to evidence exchanged prior to submitting the case to arbitration may facilitate the arbitrator’s decision making process, and may even promote interparty resolution without arbitration. Similarly, you might also consider a page limitation on the briefs; a limited writing will force each party to concisely state its position, and it will assist the arbitrator in identifying the key issues she must consider in making her decision.

Decision Implementation and Cost Allocation. Finally, consider how an arbitrator’s decision should be effectuated. Should the decision or award be applied retroactively? If so, at what point should its application begin? Take our example of a unit price disagreement. Should the arbitrator’s decision apply only to future units? Or, if the pricing decision applies retroactively, should it apply to all units from the time the adjustment was requested forward? Or from the time the dispute was submitted to arbitration? The answers to these questions depend on the projected disputes and your client’s anticipated position. Another important term to consider in an arbitration on the briefs agreement is an attorney fee-shifting provision. In keeping with the cost-efficiency goal of opting for arbitration on the briefs, an agreement that the prevailing party will recover its attorney’s fees will aid in ensuring only truly unresolvable disputes reach the arbitration phase and dis-incentivize over-lawyering.

Arbitration on the briefs is an interesting dispute resolution procedure to consider for your clients’ future projects and disputes. While it may not benefit all clients or all projects, under the right circumstances, proposing this procedure can yield dividends for your client and allow you to appear strategically savvy and cost-minded.

Author Megan K. George is an attorney in the Lexington, Kentucky office of Stites & Harbison PLLC.  She counsels clients on a diverse array of construction matters and routinely drafts, negotiates and reviews contracts for clients. She also frequently handles complex construction litigation and arbitration, advising clients in all stages of dispute resolution.