The Pros and Cons of Arbitration

Editor's Note: Arbitration is the ever-evolving tool of choice for many organizations seeking to resolve disputes without resorting to more costly and time-consuming litigation. In this roundtable conversation, Barry Ostrager, Partner, Simpson Thacher & Bartlett; Pamela Corrie, General Counsel and Chief Risk Counsel, GE Capital; and Abraham D. Sofaer, Former Federal Judge, Chairman and Founder of Federal Arbitration, Inc. (FedArb), discuss trends, challenges, innovative new models and what the future holds for arbitration. Editor-in-Chief Adam Schlagman serves as the Moderator.

Adam Schlagman: How do decision-makers at major companies feel about using arbitration to resolve disputes? Is it more or less popular than it has been in the past?

Pamela Corrie: I think it is less popular than in the past. One key reason is the inability to appeal. That's something that is difficult to solve unless you deal with an arbitration where you already agree with the rules and there is some limited right to appeal. The finality of it scares people, especially in higher-risk litigation. They're unwilling to commit to a process that is less well-known than litigation and does not have the right to appeal. Next, there is still a perception that outcomes will just be a compromise based on the law as opposed to really applying the law. We work hard to debunk that myth because the data does not bear that out. The third reason is that our contracts don't provide for arbitration. We might approach the opposing party and ask if they would like to arbitrate a dispute, but very often there'll be opposition.

Schlagman: Is it your preference to include arbitration clauses?

Corrie: The trouble is that if you include an arbitration clause, then you're saying you must arbitrate. It's not, “Here's an option.” In discussing mandatory arbitration with other platforms within GE, I have met with resistance. We've analyzed the data coming out of those platforms that do use arbitration. Unfortunately, the data has shown that arbitration has not been cheaper or faster than litigation. It hasn't necessarily been more expensive or more time-consuming, either. But it is a wash.

Many of the general counsels of these particular platforms just say, “we don't want to be committed to only doing arbitration,” and they're unwilling to change their contracts.

Schlagman: Barry, do you think that the decision-makers at these major companies are pro or con on the arbitration side?

Barry Ostrager: I agree with much of what I just heard from Pamela, which is, arbitration often tends to be no less expensive and no more expeditious than litigation, particularly since arbitrator fees are fairly substantial. I also agree that there can be concerns about the inability to appeal. And while you would think that the parties would have more control over the quality of the arbitrators that are selected to adjudicate disputes, in practice, there's a certain degree of randomness about who turns out to be at least one or two of the arbitrators in any arbitration that consists of a three-arbitrator panel. So it can be a scarier process for companies to arbitrate cases ' particularly if they have access to a high-quality federal bench.

Schlagman: There are obviously multitudes of opportunities where it is beneficial. Abe, what do you think about the popularity of arbitration today? Is it more or less so than in years past?

Abe Sofaer: The statistics bear out what Pamela said. Arbitration has, at best, flattened out in terms of the numbers. But behind the statistics are some very diverse things. There are certain industries where arbitration continues to be almost the exclusive way of resolving things. And they've worked things out. Their clauses are pretty standard and they know what they're doing. Construction would be one. Insurance is another ' particularly reinsurance. But some of them are unhappy with their set of arbitrators who have become sort of ensconced. And there are, undoubtedly, legitimate complaints about arbitration.

The company that I started ' Federal Arbitration, Inc. (www.fedarb.com) ' is really intended to create a mirror image of the litigation process because we believe that some people want the rights of litigation with the rights of arbitration ' the selection of the judge, et cetera. Probably one of the most obvious and not so often talked-about problems with arbitration is that you can choose the arbitrators, but you can't really force them to be more efficient than judges are. Consequently, you get the results that Pamela talked about. You don't have a more efficient, cheaper, faster method of adjudication in many situations. Particularly international arbitration where the arbitrators just take their time and do whatever they want and write these huge opinions, much of which mean nothing. My company has contracts with every arbitrator that serves us, including 50 former federal judges, which require them to abide by any limitations set forth by the parties in a case. And I think that's a very important innovation.

Appeals are provided in many arbitration services now as an option. And the sense that I have is that although general counsels complain about the lack of appeals, people virtually never provide for appeals. They really don't want to appeal. What they're unhappy with is that the result in arbitration is unpredictable. I guess they feel that the result is likely to be as unpredictable with appellate arbitrators as it is with trial arbitrators. So it's complex. I think the arbitration services are making efforts to provide a new format. Certainly we are.

Ostrager: And obviously there's a lot to be said for litigation and that's why people continue to use it.

Corrie: The model that Abe's business offers is truly unique and very helpful. I mentioned three things that I hear from management as to why they're reluctant to move toward arbitration. But another reason that features prominently is that they're not sure what rules are going to be applied. And so the fact that Abe's arbitrators and mediators apply the federal rules of evidence is a very innovative and creative way to make parties more comfortable that they can rely on the result. And it's not as different an animal from litigation as normal arbitration is.

Ostrager: I would agree with that. And one of the things that Abe's company is endeavoring to do, and it' s particularly important in the insurance space, is to professionalize the pool of arbitrators from which arbitration panels are being drawn.

Schlagman: Typically, an arbitrator has been a retired judge, so I would expect that these individuals have experience adjudicating matters. But is there something else?

Ostrager: No I don't think that's true anymore. I think that if you just go to any of the big arbitration services, the overwhelming majority, I would say, are not retired judges. There are inherent limitations with using arbitrators in the sense that they are largely private individuals ' . They're not trained to be judges in any way. And they don't disclose their backgrounds and their connections in the systematic law-mandated way in which judges are forced to do. So these are inherent kinds of difficulties that a general counsel has in dealing with the selection of arbitrators.

Schlagman: Do you mean the fact that the parties don't know who they're getting or the fact that this person may not be as advertised?

Sofaer: Yes, I think the latter, mainly. You have case after case where people are attacking awards because arbitrators did not disclose stuff that you and I would think should be disclosed. And often, the awards are upheld because the situation is deemed harmless, or various other grounds. There is no system for disclosure. There are sets of ethics and there are requirements that the arbitration services have, and they send them out to the proposed arbitrators. But there's no statute as there is for federal judges, for example, where you have to reveal any company you have shares in, every company that's been before you in a matter. Of course federal judges don't have to reveal who has been before them, but there's a matter of record there. You can check what the judge has done with a particular company, and you also have their published opinions. You know how they think, how they work, whereas with arbitrators you often don't. There are a lot of uncertainties in arbitration, but when you can actually get who you want, that clearly is an advantage.

Ostrager: Arbitration awards are almost always upheld because the courts are of the view that when parties opt for arbitration, the courts are only going to intervene to undo the outcome of an arbitration in egregious circumstances. But I would disagree with what Abe said about the advantages of having purely federal judges as arbitrators or mostly federal judges. The reality is, in the areas that most frequently give rise to arbitrations ' that is international, insurance, and construction disputes ' the arbitration panels tend to be composed of people with supposed expertise in those discrete areas of practice. Federal judges are typically under-represented in the arbitration pools. The problem that general counsels have is that the usual suspects who appear as members of the pool in these specialized circumstances aren't of uniform quality. And they aren't uniformly objective in terms of the resolution of the dispute. And so if you have three arbitrators and each party picks one and the third arbitrator is selected by a coin toss among candidates proposed by the two parties, whoever loses the coin toss is more likely than not going to be unhappy.

Schlagman: So what then would the three of you do to improve the process?

Sofaer: Well I certainly think that the process has gotten healthier in the sense that people in the arbitration service business realize that they have some convincing to do. And they are extending themselves and thinking about new mechanisms. For example, some of them are providing expedited forms of arbitration. In our case, we have a mandated expedited form of arbitration where we actually guarantee an award by a certain date. And so there really are substantial advantages, if you want a result within a reasonable time, to using arbitration if the arbitration services respond adequately.

Corrie: I think the way to improve the arbitration experience is to agree upfront to what you'll be doing. Ideally, it's to have an arbitration provision in your contracts that lays out with great specificity all aspects of case management.

Schlagman: But doesn't that sometimes cause as many problems as it solves?

Corrie: It can. That's why people are reluctant to do it upfront, because none of us is prescient. And so, barring the willingness to put a provision in your contracts upfront, then it's a question of having a case management conference at the beginning of the arbitration for all parties where you have extremely disciplined arbitrators and detailed schedules and limits.

Ostrager: One issue that we haven't talked about, which is really very critical to the whole calculus, is arbitrator availability. As an outside lawyer, I'd be delighted to have Abe Sofaer fairly and impartially arbitrate any kind of commercial dispute. But Abe Sofaer might very well be committed for the next 12 or 16 months, so I may not be able to get him. Even if I get Abe Sofaer to be my arbitrator and he sets aside three days to hear the case, and the case requires more than three days to be resolved, he may not be available again for two more days, or even eight months. So availability is a big issue with selecting arbitration. You can often get a trial into federal court in less time than you can get a trial before very credentialed and in-demand arbitrators.

Schlagman: Well that's more of a problem than a solution.

Ostrager: Yes it is.

Sofaer: Essentially, this is a problem in three arbitrator panels. It becomes particularly difficult to reschedule things, et cetera. That's why I think what Pamela said about the parties being proactive and making decisions about what they want is so important in arbitration. It's much more important than in litigation, because everything will tend to just go in the easiest possible route unless the parties insist on things. The arbitrators are there to serve the parties, and if the parties don't agree on something, in my experience, the weaker option tends to be the thing that happens.

Schlagman: How about fixed price as an alternative for arbitrations? Is that a viable option?

Sofaer: I'm sure it's an option, that's why we've offered it in our rules. But parties have been quite reluctant to commit themselves to it. It's not just a judge who will not be paid for more than, let's say, three days of hearing. It's the lawyers, too, who will not be paid for more than three days of hearing. So it's something that needs to be sold, and it's going to take a while.

Ostrager: When fixed-fee arbitrations become more widespread and law firms get accustomed to calculating a reasonable fixed fee and get comfortable sticking with it, then the concept of a fixed fee for the arbitrator will be a little easier for us to live with. I certainly have no issue with it. I think it completely makes sense.

Schlagman: Well Pamela, as the person writing the check, your fixed fee is something that you're advocating for. The harder sell, as you said, is getting outside counsel to get on board.

Corrie: Right. But if I've got my counsel on a fixed fee, then it's not going to be an issue.

Ostrager: I'm glad Pamela's in this discussion, because I do fixed-fee work for major financial services and industrial clients. It's really a false economy. It operates much more to the prejudice of the client than to the benefit of the client. If you're dealing with lawyers who have integrity and lawyers who aren't churning cases for the sake of generating fees, you get a much higher quality product and a much more efficient resolution of the case than you do if people are trying to game the fixed-fee system. That's a very strongly held view that I have, which is not surprising since I'm coming at it from the other side of the telescope.

Schlagman: We talked a little bit about efficiencies earlier. What do you think about the efficiency of a typical arbitration compared to litigation? Is it close, and what could be done to improve the efficiency of the arbitration process?

Corrie: If possible, I would avoid ever having to have a three-arbitrator panel again. I think that there are endless opportunities for inefficiencies at arbitration. I don't think it needs to be any less efficient than litigation. So if you don't have a three-panel arbitration and you have a process that brings you to the table relatively quickly, and the arbitrator is chosen, and you proceed and your arbitration takes place without undue abuse of discovery or excessive discovery, it should go well. The problem that we had is that once you get your arbitral award, you then have to domesticate the judgment and that basically takes you multiple days, weeks or months, depending on where you are. And it does introduce some inefficiency in smaller-scale arbitrations.

Ostrager: Notwithstanding what Pamela said, very few companies are going to agree to a sole arbitrator, unless there's a wide berth in the selection process that gives all of the litigants a complete veto over any particular arbitrator. There are going to be very few circumstances where the parties would knowingly opt for a sole arbitrator. I think that if there are carefully vetted pools of arbitrators with specific expertise of the subject matter of an arbitration, and the pools are sufficiently large so that you don't run into the kind of inefficiencies that often plague three-arbitrator panels, there's a role for arbitration in the international, insurance, reinsurance, and construction space ' and maybe even in the patent space.

Schlagman: As far as efficiencies are concerned, what ' apart from the ability to get more qualified arbitrators out there ' could you foresee as a method to improve the process?

Sofaer: I think the most efficient model for arbitration of fairly large commercial cases like what you see in the federal and state court is to have one arbitrator and an appeal to three arbitrators. In a system where you have a sufficient number of really qualified people to make both parties feel comfortable that they're going to be able to find a panel ' the appellate panel or the individual judge. And that is still a work to be done. We're out there trying to convince people to do that.

But thus far I've found that people who want to arbitrate, tend to want to have a three judge panel because they feel that they want someone on their panel who has industry experience or knows their side of the industry. So there's still not a commitment to the kind of litigation that people are used to in court. It's much cheaper, much faster and I think probably just as good if not better to have a single judge, or a single arbitrator who knows that there could be an appeal from his or her decision. And it's easier to find one such person than three. And to have contractual control over such a person and get that person to respond effectively and efficiently to the needs of the parties. That's a model I think will be most successful in let's say 10 years from now.

'

Editor's Note: Arbitration is the ever-evolving tool of choice for many organizations seeking to resolve disputes without resorting to more costly and time-consuming litigation. In this roundtable conversation, Barry Ostrager, Partner, Simpson Thacher & Bartlett; Pamela Corrie, General Counsel and Chief Risk Counsel, GE Capital; and Abraham D. Sofaer, Former Federal Judge, Chairman and Founder of Federal Arbitration, Inc. (FedArb), discuss trends, challenges, innovative new models and what the future holds for arbitration. Editor-in-Chief Adam Schlagman serves as the Moderator.

Adam Schlagman: How do decision-makers at major companies feel about using arbitration to resolve disputes? Is it more or less popular than it has been in the past?

Pamela Corrie: I think it is less popular than in the past. One key reason is the inability to appeal. That's something that is difficult to solve unless you deal with an arbitration where you already agree with the rules and there is some limited right to appeal. The finality of it scares people, especially in higher-risk litigation. They're unwilling to commit to a process that is less well-known than litigation and does not have the right to appeal. Next, there is still a perception that outcomes will just be a compromise based on the law as opposed to really applying the law. We work hard to debunk that myth because the data does not bear that out. The third reason is that our contracts don't provide for arbitration. We might approach the opposing party and ask if they would like to arbitrate a dispute, but very often there'll be opposition.

Schlagman: Is it your preference to include arbitration clauses?

Corrie: The trouble is that if you include an arbitration clause, then you're saying you must arbitrate. It's not, “Here's an option.” In discussing mandatory arbitration with other platforms within GE, I have met with resistance. We've analyzed the data coming out of those platforms that do use arbitration. Unfortunately, the data has shown that arbitration has not been cheaper or faster than litigation. It hasn't necessarily been more expensive or more time-consuming, either. But it is a wash.

Many of the general counsels of these particular platforms just say, “we don't want to be committed to only doing arbitration,” and they're unwilling to change their contracts.

Schlagman: Barry, do you think that the decision-makers at these major companies are pro or con on the arbitration side?

Barry Ostrager: I agree with much of what I just heard from Pamela, which is, arbitration often tends to be no less expensive and no more expeditious than litigation, particularly since arbitrator fees are fairly substantial. I also agree that there can be concerns about the inability to appeal. And while you would think that the parties would have more control over the quality of the arbitrators that are selected to adjudicate disputes, in practice, there's a certain degree of randomness about who turns out to be at least one or two of the arbitrators in any arbitration that consists of a three-arbitrator panel. So it can be a scarier process for companies to arbitrate cases ' particularly if they have access to a high-quality federal bench.

Schlagman: There are obviously multitudes of opportunities where it is beneficial. Abe, what do you think about the popularity of arbitration today? Is it more or less so than in years past?

Abe Sofaer: The statistics bear out what Pamela said. Arbitration has, at best, flattened out in terms of the numbers. But behind the statistics are some very diverse things. There are certain industries where arbitration continues to be almost the exclusive way of resolving things. And they've worked things out. Their clauses are pretty standard and they know what they're doing. Construction would be one. Insurance is another ' particularly reinsurance. But some of them are unhappy with their set of arbitrators who have become sort of ensconced. And there are, undoubtedly, legitimate complaints about arbitration.

The company that I started ' Federal Arbitration, Inc. (www.fedarb.com) ' is really intended to create a mirror image of the litigation process because we believe that some people want the rights of litigation with the rights of arbitration ' the selection of the judge, et cetera. Probably one of the most obvious and not so often talked-about problems with arbitration is that you can choose the arbitrators, but you can't really force them to be more efficient than judges are. Consequently, you get the results that Pamela talked about. You don't have a more efficient, cheaper, faster method of adjudication in many situations. Particularly international arbitration where the arbitrators just take their time and do whatever they want and write these huge opinions, much of which mean nothing. My company has contracts with every arbitrator that serves us, including 50 former federal judges, which require them to abide by any limitations set forth by the parties in a case. And I think that's a very important innovation.

Appeals are provided in many arbitration services now as an option. And the sense that I have is that although general counsels complain about the lack of appeals, people virtually never provide for appeals. They really don't want to appeal. What they're unhappy with is that the result in arbitration is unpredictable. I guess they feel that the result is likely to be as unpredictable with appellate arbitrators as it is with trial arbitrators. So it's complex. I think the arbitration services are making efforts to provide a new format. Certainly we are.

Ostrager: And obviously there's a lot to be said for litigation and that's why people continue to use it.

Corrie: The model that Abe's business offers is truly unique and very helpful. I mentioned three things that I hear from management as to why they're reluctant to move toward arbitration. But another reason that features prominently is that they're not sure what rules are going to be applied. And so the fact that Abe's arbitrators and mediators apply the federal rules of evidence is a very innovative and creative way to make parties more comfortable that they can rely on the result. And it's not as different an animal from litigation as normal arbitration is.

Ostrager: I would agree with that. And one of the things that Abe's company is endeavoring to do, and it' s particularly important in the insurance space, is to professionalize the pool of arbitrators from which arbitration panels are being drawn.

Schlagman: Typically, an arbitrator has been a retired judge, so I would expect that these individuals have experience adjudicating matters. But is there something else?

Ostrager: No I don't think that's true anymore. I think that if you just go to any of the big arbitration services, the overwhelming majority, I would say, are not retired judges. There are inherent limitations with using arbitrators in the sense that they are largely private individuals ' . They're not trained to be judges in any way. And they don't disclose their backgrounds and their connections in the systematic law-mandated way in which judges are forced to do. So these are inherent kinds of difficulties that a general counsel has in dealing with the selection of arbitrators.

Schlagman: Do you mean the fact that the parties don't know who they're getting or the fact that this person may not be as advertised?

Sofaer: Yes, I think the latter, mainly. You have case after case where people are attacking awards because arbitrators did not disclose stuff that you and I would think should be disclosed. And often, the awards are upheld because the situation is deemed harmless, or various other grounds. There is no system for disclosure. There are sets of ethics and there are requirements that the arbitration services have, and they send them out to the proposed arbitrators. But there's no statute as there is for federal judges, for example, where you have to reveal any company you have shares in, every company that's been before you in a matter. Of course federal judges don't have to reveal who has been before them, but there's a matter of record there. You can check what the judge has done with a particular company, and you also have their published opinions. You know how they think, how they work, whereas with arbitrators you often don't. There are a lot of uncertainties in arbitration, but when you can actually get who you want, that clearly is an advantage.

Ostrager: Arbitration awards are almost always upheld because the courts are of the view that when parties opt for arbitration, the courts are only going to intervene to undo the outcome of an arbitration in egregious circumstances. But I would disagree with what Abe said about the advantages of having purely federal judges as arbitrators or mostly federal judges. The reality is, in the areas that most frequently give rise to arbitrations ' that is international, insurance, and construction disputes ' the arbitration panels tend to be composed of people with supposed expertise in those discrete areas of practice. Federal judges are typically under-represented in the arbitration pools. The problem that general counsels have is that the usual suspects who appear as members of the pool in these specialized circumstances aren't of uniform quality. And they aren't uniformly objective in terms of the resolution of the dispute. And so if you have three arbitrators and each party picks one and the third arbitrator is selected by a coin toss among candidates proposed by the two parties, whoever loses the coin toss is more likely than not going to be unhappy.

Schlagman: So what then would the three of you do to improve the process?

Sofaer: Well I certainly think that the process has gotten healthier in the sense that people in the arbitration service business realize that they have some convincing to do. And they are extending themselves and thinking about new mechanisms. For example, some of them are providing expedited forms of arbitration. In our case, we have a mandated expedited form of arbitration where we actually guarantee an award by a certain date. And so there really are substantial advantages, if you want a result within a reasonable time, to using arbitration if the arbitration services respond adequately.

Corrie: I think the way to improve the arbitration experience is to agree upfront to what you'll be doing. Ideally, it's to have an arbitration provision in your contracts that lays out with great specificity all aspects of case management.

Schlagman: But doesn't that sometimes cause as many problems as it solves?

Corrie: It can. That's why people are reluctant to do it upfront, because none of us is prescient. And so, barring the willingness to put a provision in your contracts upfront, then it's a question of having a case management conference at the beginning of the arbitration for all parties where you have extremely disciplined arbitrators and detailed schedules and limits.

Ostrager: One issue that we haven't talked about, which is really very critical to the whole calculus, is arbitrator availability. As an outside lawyer, I'd be delighted to have Abe Sofaer fairly and impartially arbitrate any kind of commercial dispute. But Abe Sofaer might very well be committed for the next 12 or 16 months, so I may not be able to get him. Even if I get Abe Sofaer to be my arbitrator and he sets aside three days to hear the case, and the case requires more than three days to be resolved, he may not be available again for two more days, or even eight months. So availability is a big issue with selecting arbitration. You can often get a trial into federal court in less time than you can get a trial before very credentialed and in-demand arbitrators.

Schlagman: Well that's more of a problem than a solution.

Ostrager: Yes it is.

Sofaer: Essentially, this is a problem in three arbitrator panels. It becomes particularly difficult to reschedule things, et cetera. That's why I think what Pamela said about the parties being proactive and making decisions about what they want is so important in arbitration. It's much more important than in litigation, because everything will tend to just go in the easiest possible route unless the parties insist on things. The arbitrators are there to serve the parties, and if the parties don't agree on something, in my experience, the weaker option tends to be the thing that happens.

Schlagman: How about fixed price as an alternative for arbitrations? Is that a viable option?

Sofaer: I'm sure it's an option, that's why we've offered it in our rules. But parties have been quite reluctant to commit themselves to it. It's not just a judge who will not be paid for more than, let's say, three days of hearing. It's the lawyers, too, who will not be paid for more than three days of hearing. So it's something that needs to be sold, and it's going to take a while.

Ostrager: When fixed-fee arbitrations become more widespread and law firms get accustomed to calculating a reasonable fixed fee and get comfortable sticking with it, then the concept of a fixed fee for the arbitrator will be a little easier for us to live with. I certainly have no issue with it. I think it completely makes sense.

Schlagman: Well Pamela, as the person writing the check, your fixed fee is something that you're advocating for. The harder sell, as you said, is getting outside counsel to get on board.

Corrie: Right. But if I've got my counsel on a fixed fee, then it's not going to be an issue.

Ostrager: I'm glad Pamela's in this discussion, because I do fixed-fee work for major financial services and industrial clients. It's really a false economy. It operates much more to the prejudice of the client than to the benefit of the client. If you're dealing with lawyers who have integrity and lawyers who aren't churning cases for the sake of generating fees, you get a much higher quality product and a much more efficient resolution of the case than you do if people are trying to game the fixed-fee system. That's a very strongly held view that I have, which is not surprising since I'm coming at it from the other side of the telescope.

Schlagman: We talked a little bit about efficiencies earlier. What do you think about the efficiency of a typical arbitration compared to litigation? Is it close, and what could be done to improve the efficiency of the arbitration process?

Corrie: If possible, I would avoid ever having to have a three-arbitrator panel again. I think that there are endless opportunities for inefficiencies at arbitration. I don't think it needs to be any less efficient than litigation. So if you don't have a three-panel arbitration and you have a process that brings you to the table relatively quickly, and the arbitrator is chosen, and you proceed and your arbitration takes place without undue abuse of discovery or excessive discovery, it should go well. The problem that we had is that once you get your arbitral award, you then have to domesticate the judgment and that basically takes you multiple days, weeks or months, depending on where you are. And it does introduce some inefficiency in smaller-scale arbitrations.

Ostrager: Notwithstanding what Pamela said, very few companies are going to agree to a sole arbitrator, unless there's a wide berth in the selection process that gives all of the litigants a complete veto over any particular arbitrator. There are going to be very few circumstances where the parties would knowingly opt for a sole arbitrator. I think that if there are carefully vetted pools of arbitrators with specific expertise of the subject matter of an arbitration, and the pools are sufficiently large so that you don't run into the kind of inefficiencies that often plague three-arbitrator panels, there's a role for arbitration in the international, insurance, reinsurance, and construction space ' and maybe even in the patent space.

Schlagman: As far as efficiencies are concerned, what ' apart from the ability to get more qualified arbitrators out there ' could you foresee as a method to improve the process?

Sofaer: I think the most efficient model for arbitration of fairly large commercial cases like what you see in the federal and state court is to have one arbitrator and an appeal to three arbitrators. In a system where you have a sufficient number of really qualified people to make both parties feel comfortable that they're going to be able to find a panel ' the appellate panel or the individual judge. And that is still a work to be done. We're out there trying to convince people to do that.

But thus far I've found that people who want to arbitrate, tend to want to have a three judge panel because they feel that they want someone on their panel who has industry experience or knows their side of the industry. So there's still not a commitment to the kind of litigation that people are used to in court. It's much cheaper, much faster and I think probably just as good if not better to have a single judge, or a single arbitrator who knows that there could be an appeal from his or her decision. And it's easier to find one such person than three. And to have contractual control over such a person and get that person to respond effectively and efficiently to the needs of the parties. That's a model I think will be most successful in let's say 10 years from now.

'