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Arbitration as a Solution During and After the Pandemic

Palm Beach County Bar Association > ADR Corner > Arbitration as a Solution During and After the Pandemic
ADR Corner1

Published: May 2021
By: Daria Pustilnik 

While courts experience an unprecedented backlog of cases, and trials are largely on hold, agreeing to a binding arbitration can be an effective approach to dispute resolution for commercial cases.  Before the pandemic, parties primarily considered whether arbitration would be cheaper and faster than litigation.  In light of the pandemic, arbitration has emerged as a faster route to the final resolution of a commercial dispute.

In particular, because of trial restrictions, Florida is experiencing a significant buildup of cases. The Florida Trial Court Budget Commission reported that as of June 2020, Florida courts had a backlog of 992,074 cases and 4,987 delayed trials.[1]  By November 2020, these numbers went up to 1,147,703 cases and 5,187 delayed trials.[2]   Notably, approximately 84% of delayed trials are criminal.  On September 1, 2020, Chief Judge Krista Marx stated that upon resumption of trials, criminal cases will take priority.[3]  It is estimated that it will take Florida courts several years to resolve the backlog of cases. Therefore, civil cases will be trapped in the court system, and a commercial contract dispute may not be set for trial for several years.  At the same time, the pandemic has led to an increased number of disputes.  Luckily, arbitration is an effective option for commercial cases that can provide significant benefits when compared to litigation.  The benefits may include:

  • Relative speed.
    • In light of the backlog of cases and limited availability of trials, arbitration will allow a case that does not settle to proceed to a final hearing and a resolution.
  • Customizable procedures and relatively informal process.
    • Arbitration is highly customizable. The parties are free to adopt the rules of a forum, adopt modified rules, or create their own rules for an ad hoc process. Many institutions’ rules make expedited procedures available for disputes that satisfy certain criteria, which could be advantageous. Routine hearings are usually conducted remotely, and final hearings may be conducted remotely, if necessary.
    • Generally, arbitration is private. The need for privacy can be specified in the arbitration agreement and confidentiality is a feature of the rules of most, if not all, arbitration institutions.
    • Arbitration provides the parties an opportunity to select an arbitrator or a panel with experience in the industry or the particular area of the law that is relevant to the dispute. This may contribute to a speedy and efficient resolution.
    • The hearings in international and domestic arbitrations have often been conducted remotely even before the pandemic, and the tribunals are used to employing technology to advance cases.
    • Arbitration can be an effective cost-cutting tool. For example, generally in arbitration, the rules of evidence are relaxed, and there is less discovery and motion practice. The resulting cost savings often offset the arbitrator’s or the panel’s fees.  Of course, the rules vary from forum to forum and, similarly to litigation, the cost will greatly depend on the parties’ approach.

The process for jointly submitting to arbitration is simple: the parties must enter into an agreement to arbitrate and file a claim with the forum, such as the American Arbitration Association, JAMS, or International Centre for Dispute Resolution (unless the parties decide to conduct an ad hoc arbitration without the assistance of a forum). To realize the benefits of arbitration, the parties should carefully craft the arbitration agreement and may wish to consider the following aspects:

  • Pre-arbitration mediation.
  • Forum/institution or an ad hoc arbitration.
  • Governing law.
  • Adoption of the institution’s rules (whether those in effect at the time the contract is signed or including any future amendments) or modified rules. If a set of rules is adopted, the following often will be addressed, but the parties can provide for modifications.
  • Single or multiple arbitrators.
  • Appointment procedure for the tribunal.
  • Requirements for specialized knowledge or expertise of the arbitrator(s).
  • Rules for communications with the tribunal.
  • Availability and procedure for:
    • Preliminary injunctions.
    • Dispositive motions.
    • Expedited resolution of disputes involving low amounts in controversy.
    • Withdrawal of claims.
    • Combining of the disputes.
  • Time limit for the completion of arbitration.
  • Entitlement to attorneys’ fees and costs and fees for seeking fees.
  • Availability of an appeal and appellate procedure.

All these issues have been subject to disputes in my practice. I find that the arbitration clauses the parties draft when structuring deals and well before any disputes arise often tend to be short and do not address many procedural aspects.  Addressing these in the arbitration clause can result in significant cost savings during the arbitration. 

In sum, arbitration can present significant advantages as well as be an effective tool for dispute resolution during and after the pandemic. Parties and their counsel should consider this option while the courts struggle to resolve the backlog of pending cases.

Daria Pustilnik is a lawyer with Kobre & Kim, a disputes and investigations firm with offices worldwide. Daria has represented clients in their domestic and cross-border complex commercial disputes in state and federal courts; under the rules of the American Health Lawyers Association, American Arbitration Association, International Centre for Dispute Resolution, and the London Court of International Arbitration; and in arbitration-related litigation, such as cases pursuant to 28 USC § 1782. Daria is experienced in handling matters involving simultaneous arbitration, bankruptcy, civil and agency proceedings in multiple jurisdictions, such as the US, UK, BVI and Russian Federation. Before joining Kobre & Kim, she practiced at Shutts & Bowen LLP, and served as a law clerk for Judges Kenneth A. Marra and James M. Hopkins in the Southern District of Florida. Daria can be reached at daria.pustilnik@kobrekim.com or 347-899-0423.  

[1] Trial Court Budget Commission Jan. 22, 2021, Meeting Agenda, Agenda Item V.: 2021 Legislative Session Update, Pandemic Generated Workload Statewide Estimates (available at https://www.flcourts.org/content/download/714796/file/TCBC%20Meeting%20Packet%201-22-2021.pdf) (accessed on March 14, 2021). 

[2] Id.

[3] Chief Judge Krista Marx discusses backlog in Palm Beach County courts (Sept. 1, 2020) (available at https://www.msn.com/en-us/news/crime/chief-judge-krista-marx-discusses-backlog-in-palm-beach-county-courts/vi-BB18zHdr (accessed on March 14, 2021).