Tony Byler and Daniel E. Fierstein | Construction Law Signal | January 14, 2016
- The parties can select arbitrators with construction expertise who speak their language and are more likely to understand complex construction issues than a general court of law.
- Arbitrations are characteristically speedier from inception to award.
- Discovery (the parties’ exchange of information and taking of depositions) is often more truncated and can, therefore, be less costly.
- Arbitrator awards are typically binding and not normally subject to an appeals process that tends to add more time and cost to the outcome.
We would be remiss, however, if we did not mention that arbitration is not for everyone. Parties are often required to pay filing and other administrative fees that are considerably more expensive than the cost of court filings, and they must also pay the arbitrators, who typically bill by the hour (feel free to insert your own generic lawyer joke here). In the construction context, we find that owners, developers, and public entities often will elect litigation over arbitration.
The finality of the award cannot be overstated. This article about a recent federal court decision – in which a party discovered after the award that one of the arbitrators failed to disclose a number of serious charges that included the unauthorized practice of law – drives the point home. Under the Federal Arbitration Act, courts may only vacate an arbitration award under very limited and extreme circumstances:
- the award was obtained by corruption, fraud, or undue means;
- there was evident partiality or corruption in any of the arbitrators;
- the arbitrators were guilty of misconduct for refusing to hear evidence relevant and material to the dispute; or
- the arbitrators exceeded or imperfectly executed their powers.
In other words, a court will not disrupt an arbitration award simply because the arbitrators may have “gotten it wrong.”
It can be strange and counterintuitive to think about how a dispute should be resolved when signing a contract. Most parties to a construction contract are…