Choosing Between Administered and Non-Administered Arbitration - Chapter 3 - Arbitration Clauses for International Contracts - 2nd Edition

Paul Friedland is a Partner at White & Case LLP and Chair of the firm's International Arbitration Practice Group. Mr. Friedland was Chair of the Task Force that developed the recent "IBA Guidelines for Drafting International Arbitration Clauses." Mr. Friedland is Chair of the Law Committee and a Member of the Board of Directors of the AAA and a Court Member of the LCIA.

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Originally from Arbitration Clauses for International Contracts - Second Edition

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CHOOSING BETWEEN ADMINISTERED AND NON-ADMINISTERED ARBITRATION

Administered, or “institutional,” arbitration means arbitration conducted under the rules of an arbitral institution (such as the ICC), where the parties pay the institution to assist, in accordance with its rules, in the initiation of the arbitration and in the constitution of the arbitral tribunal, to intervene as appropriate before the arbitrators are selected (and occasionally after), and to assist throughout the process with matters such as payments, notice, mailings, and arranging for hearing facilities.

Non-administered, or “ad hoc,” arbitration, means arbitration conducted by the parties and the arbitrators (once appointed) without the assistance of an administering institution.

In some non-administered arbitrations, the institutional presence may not be entirely absent, as the parties may designate an institution to act as an appointing authority for the arbitral tribunal in the event that the parties are unable to agree upon a tribunal by themselves. Thus, for example, the ICC, the LCIA and the AAA will for a modest fee act as an appointing authority even where the parties have not chosen arbitration under their rules. The LCIA and the AAA have issued booklets detailing the services that they will provide in arbitrations under the UNCITRAL Rules. The parties may also choose a designated set of rules even without an administering institution (such as the UNCITRAL Arbitration Rules, adopted in 1976 by the U.N. Commission on International Trade Law). I refer to such arbitration as “hybrid” arbitration. Hybrid arbitration remains non-administered in the sense that no institution is available to assist the parties in the application of its own rules, other than with respect to appointment of the arbitrators.

This Chapter analyzes the principal advantages and disadvantages of administered and non-administered arbitration. In most business situations, administered arbitration is the safer and more efficient choice.