Design firms typically use litigation or arbitration as a dispute resolution mechanism. Although arbitration was initially touted as a more efficient dispute resolution method, but over the years it has become clear that arbitration can be just as complex and costly as litigation. In response to such concerns, the American Arbitration Association (AAA) has introduced Alternative Fee Arrangements for Arbitration. Parties to a dispute can now choose from two alternate fee arrangements prior to the appointment of an arbitrator.
The two alternative fee arrangements are:
- Fixed Fee Arrangement, whereby an AAA arbitration panel member proposes a fixed fee for the pre-hearing, hearing, and post-hearing phases of arbitration that must be approved by all parties.
- Capped Fee Arrangement, whereby an AAA arbitration panel member proposes a fee cap for the entire process that must be approved by all parties.
The goal is to provide the parties cost savings, fee transparency, and predictability to the arbitration process so that parties have more certainty about the expected costs of an arbitration. Firms who prefer arbitration as a dispute resolution mechanism can now use one of these arrangements (if the other party agrees) to better manage their costs.
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