Making Construction Arbitration More Efficient With a Good Arbitration Clause

Arbitration continues to be a preferred method for resolving construction disputes due to its confidentiality, efficiency, and the ability to select experienced neutrals. However, the effectiveness of arbitration often hinges on the quality of the dispute resolution clause. In this article for ALM, JAMS neutral Andrew D. Ness explains how thoughtful drafting can help parties avoid procedural pitfalls and create a more streamlined path to resolution.

A Standard Clause Works, but Leaves Gaps

While boilerplate clauses, such as the JAMS model arbitration provision, are enforceable and sufficient to trigger arbitration, they often lack the specificity needed to handle the nuances of construction disputes. Enhancements can help reduce ambiguity and future disagreements.

Choosing Between a Sole Arbitrator or a Panel

For high-stakes disputes, a three-member arbitration panel can lead to more balanced and well-reasoned outcomes. To manage costs, contracts can specify that the panel chair alone decides procedural matters. A tiered approach may also be useful—employ a single arbitrator for disputes below a certain dollar threshold and require a panel for larger cases.

Clarifying the Arbitrator Selection Process

The common "list and strike" method works, but parties may prefer more control. An alternative is to allow each party to appoint one arbitrator, with those two selecting the chair. This method can promote greater trust in the neutrality and balance of the tribunal.

Addressing Joinder and Consolidation Directly

Joinder and consolidation provisions in standard rules may not be clear or predictable. Drafters should decide whether to allow or prohibit these procedures. If consolidation is allowed, limit it to known third parties like subcontractors or consultants to reduce the risk of inconsistent decisions.

Tailoring Discovery Provisions

Overly restrictive discovery can hinder access to key evidence, while allowing full discovery under court rules can drive up time and cost. The best approach is to customize discovery expectations based on likely disputes. For instance, permit depositions above a certain monetary threshold or give the tribunal discretion to expand discovery when justified.

Incorporating a Tiered Dispute Resolution Process

Including pre-arbitration steps can reduce the number of full-blown disputes. A tiered clause might require meetings between on-site personnel, senior management, or even mediation before arbitration proceeds. These steps give parties a chance to resolve matters early and preserve project relationships.

Selecting the Right Venue for Arbitration

Construction hearings often need substantial space, document access, and technology. Avoid defaulting to the project location, which might not be suitable. Instead, choose a city with proper facilities that is convenient for all parties involved.

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