FedArb is adding an optional provision that enables parties to select arbitrators in a three member tribunal in such a way that the arbitrators do not know which party selected them. Under this process, litigants select arbitrators as before but channel their input through FedArb so that the arbitrator does not know what party selected them.
FedArb acts as the conduit for vetting the arbitrators so litigants can choose the best expertise. FedArb then appoints the party-designated arbitrators without letting them know which party has designated them. (Note: this procedure does not work if the parties independently reach out to potential arbitrators.)
The wisdom of such an approach was underscored by a recent study where participants (a group of international arbitrators in a mock proceeding) were randomly told they had been appointed: by one of the parties, by joint agreement of the parties, or simply that they had been appointed without disclosing the identity of the party appointing them. The authors concluded that:
Based on a sample of 266 responses from international arbitrators around the world, we found that arbitrators nominated by one of the two parties tended to make decisions more favorable to that party compared to arbitrators appointed by the opposite party.
Affiliation Bias in Arbitration: An Experimental Approach published in August by the University of Arizona’s James E. Rogers College of Law.
A general discussion of the potential concerns about the role of party-appointed arbitrators is set forth in Thomas J. Stipanowich, Reflections on the State and Future of Commercial Arbitration: Challenges, Opportunities, Proposals, 25 AMERICAN REVIEW OF INTERNATIONAL ARBITRATION 297 (2014), available at SSRN.
FedArb seeks to provide litigants the best solutions given its superior administrative services and specialized group of arbitrators and mediators — most of whom are retired federal district court judges.
Kennen D. Hagen
President & CEO
Federal Arbitration, Inc.