The rapid growth of construction arbitration over the last 20 years is a testament to its advantages over traditional litigation: speed, cost and flexibility. But as parties submit larger and more sophisticated disputes, they are looking for ways to ensure the process can still provide those advantages. Before joining JAMS, over the course of almost 25 years working in-house in large, publicly held companies, I was constantly asked two questions by clients: "Should we still arbitrate disputes?" and "Can't you make it less expensive?" Clients are primarily concerned with time and cost.

The good news is that there are several levers arbitrators and counsel can employ to "value engineer" their construction arbitrations. First, sophisticated counsel can design a better, more efficient process at the front end of a project to suit complex construction cases. But what if the parties' arbitration agreement contains just a generic or barebones dispute resolution clause? Arbitrators and counsel can still employ a number of techniques to minimize concerns about time and cost.

The best way, of course, to maximize efficiency is at the beginning, before disputes (inevitably) arise, making agreement on anything more difficult to reach. Drafting the dispute resolution clause is often left to the end of negotiations. This is where both inside and outside counsel can add value. Having the right model clause prepared in advance can dramatically reduce the time and cost to resolve disputes down the road.

Here are a few key clauses that can help control arbitration time and cost:

Build in time constraints. As every construction lawyer knows, and as their clients appreciate, delays inevitably increase costs. Drafting deadlines into your dispute resolution clause can help parties avoid unnecessary delays. Time constraints can be built in to the selection of arbitrators, the first procedural hearing, the evidentiary hearing, the hearing itself and the rendering of the award.

Drafting tips:

  • Make sure any arbitrator selected is required to meet the time constraints built in your model clause. Example: "Any arbitrator nominated must be able to serve within the time frames specified herein before accepting appointment."
  • Use your clause to limit the length of a hearing and ensure it is heard on consecutive business days to further increase cost efficiency. Example: "Unless the parties agree otherwise, the tribunal will hold a hearing on the merits within six to nine months of its constitution, which will be set for consecutive days (excluding weekends and holidays) and last for no more than 10 days."
  • Require the parties to attend the procedural conference with counsel, which allows in-house counsel to help establish the most cost-effective arbitration schedule, and push for the earliest hearing on the merits. Example: ''Unless the parties agree otherwise, the tribunal will hold a procedural conference with the parties and their counsel within 30 days of its constitution, either in person or via a videoconferencing platform, to set the schedule for the arbitration, including the date(s) for the hearing on the merits."

Drive the schedule with a memorial style arbitration process. Consider requiring a memorial style process that favors getting all the evidence out early. Under this process, which is more common in international arbitration, a claimant files its memorial (legal brief) with its evidentiary support (witness statements, documents and expert reports) within a few months of the arbitration's commencement. The respondent files its counter-memorial with evidentiary support a few months later. The tribunal can then call for reply submissions, if appropriate, or simply move to a hearing.

Drafting tip:

  • Include a schedule for the service of the memorial and counter-memorials. Example: "Unless otherwise agreed by the parties, at the first in-person or virtual procedural hearing, the tribunal will set a schedule for conducting the proceeding, which shall include the service by the claimant of a memorial, together with written witness statements, documents and expert reports, within three months; service by the respondent of a counter-memorial, together with witness statements, documents and expert reports, within two months; and service of reply and sur-reply memorials, as appropriate within two weeks."

Include discovery limits. Discovery, particularly e-discovery, can exponentially increase the cost of arbitration. Well-crafted clauses can eliminate or significantly curtail discovery. Rule 17 of the JAMS Engineering and Construction Arbitration Rules & Procedures can aid parties in that Rule 17(a) requires parties to "exchange . . . all . . . non-privileged documents . . . on which they rely in support of their positions" and identify "names of individuals [with] relevant knowledge or who may be called" to testify "within 21 calendar days after all pleadings . . . have been received" and Rule 17(b) limits parties to two depositions. Consider either expressly prohibiting requests for admission and/or interrogatories, or providing that the parties are limited to the discovery contemplated in Rule 17. You may also want to specify no document requests or require parties to apply to the arbitrator for narrowly tailored requests limited to items relevant and material to the outcome.

Drafting tip: Explicitly make cost a factor for the arbitrator to consider before allowing any additional discovery. Arbitrators will follow specific limits on discovery set out in the parties' arbitration agreement. Example: "Unless otherwise agreed by the parties, discovery shall be limited to the exchanges of documents and discovery provided for in Rule 17 of the JAMS Engineering and Construction Arbitration Rules & Procedures. Any party seeking additional discovery shall apply to the arbitrator, who shall consider whether the requests are narrowly tailored and limited to items that are relevant and material to the outcome, and the reasonable need for the requested discovery in light of the cost and amount at issue in the case."

But what if your dispute arises from an arbitration agreement that doesn't include any of these provisions?

Even where parties haven't written cost-savings mechanisms into their dispute resolution clause at the front end, the arbitrator can still push the parties to agree on, or order on his or her own, a number of procedures to move the dispute forward and to structure the presentation of evidence that both suit complex construction cases and enhance efficiency. Arbitrators know, just as experience construction and engineering lawyers do, that time equals money and delays increase costs. Consider the following:

  • Hybrid Hearings
    After more than a year of conducting virtual hearings, arbitrators have gotten used to them. As we begin to return to in-person hearings, arbitrators can leverage their experience during the pandemic to help parties reduce costs by continuing to conduct procedural and non-evidentiary hearings virtually instead of having parties and their counsel incur the time and expense of traveling to a hearing. Even when it comes to evidentiary hearings, although we all may be eager to return to "normal," arbitrators can help parties reduce costs by allowing a mixture of in-person and virtual testimony. Arbitrators and parties can value engineer dispute resolution by taking a hard look at which witnesses need to appear in person and which can appear virtually.
  • Party Participation
    Arbitrators can encourage senior party representatives to attend the first procedural conference, particularly if it will take place on Zoom or a similar videoconferencing platform. Party representatives, who have their eye on the bottom line, are often more empowered than outside counsel to agree to procedures that will help set a faster schedule—agreeing to shorter hearings with a chess clock, or to dispense with certain types or areas of discovery. They may also be emboldened to agree to the one of the various techniques arbitrators can employ for reducing the time and cost of presenting witness and expert evidence.
  • Written Witness Statements
    Encouraging counsel to submit direct testimony through written witness statements—a practice common in international arbitration—can dramatically reduce both the time and cost of construction arbitration. It eliminates the need for depositions, since the parties know what testimony the other parties will introduce, and it allows them to prepare better, more targeted cross-examination. It also significantly cuts down the length of the hearing, as time is only spent on cross-examination and redirect. It also allows arbitrators the opportunity to gain a better understanding and appreciation of the parties' positions in advance of the hearing.
  • Coupling Expert Reports With Hearing Presentations
    Expert evidence can be one of the most costly aspects of construction arbitration. Asking the parties to submit expert reports to the arbitrators in advance as their direct testimony, and then allowing them to make a short (30- to 90-minute) visual presentation (PowerPoint or other format) at the hearing can similarly eliminate the need for expert depositions and significantly improve the efficiency and efficacy of expert testimony.
  • Joint Expert Meetings Without Lawyers
    Arbitrators can, at the request of a party or on their own initiative, order the parties' respective experts to meet outside the presence of lawyers to explore where they agree and disagree, and then produce a report listing the agreed-upon and disputed issues. This allows the parties and the arbitrators to understand what area(s) and points of disagreement between the experts exist and to limit the examination to those points, significantly cutting down preparation and hearing time.
  • "Hot-Tubbing" of Experts
    Either as an alternative to the experts meeting outside the presence of counsel and issuing a joint report, or in addition to them, the parties can agree, or the arbitrator(s) can order, that the parties' respective experts on any given topic appear together for questioning by the tribunal. This technique, which is also more common in international arbitration (and often referred to as "hot-tubbing"), can uncover why the experts disagree, thus helping the arbitrator focus his or her questioning and reducing hearing time. This process can be particularly helpful for technical issues.

Arbitration of construction disputes must continue to meet the parties' needs. If arbitrators and counsel use the tools available to them to value engineer the process of resolving construction arbitration disputes to ensure it remains fast, cost-effective and flexible, it will.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.