generally effective method for resolving contractual disputes, the procedure could be greatly improved by creating a uniform system specifically for the construction industry. In 1965 the joint committee was enlarged to include the following organizations: American Institute of Architects National Society of Professional Engineers After a year of study, new rules were adopted, known as the Construction Industry Arbitration Rules, to be administered by the American Arbitration Association. These rules are now recommended for use by all the organizations in the industry. An arbitration clause referring to these rules is contained in contracts generally used in the construction industry. THE NATIONAL CONSTRUCTION In 1966, with the object of creating the best possible on-going arbitration system, the National Construction Industry Arbitration Committee was established with the representatives of the various industry and professional associations. Regional advisory committees were also established to work with the American Arbitration Association's regional offices to improve the available construction panel, to serve as a conduit for information on arbitration, and to advise the AAA on administrative problems. To implement these new rules and to meet anticipated growth in cases, the AAA's National Panel of Construction Arbitrators was enlarged with the addition of construction industry arbitrators nominated by the Regional Committees. HOW TO ARBITRATE UNDER Under the Construction Industry Arbitration Rules, arbitration can be provided for in the original contract. This provision is expressed in a future dispute arbitration clause of a contract. A clause reading "Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association, and judgment upon the award may be entered in any court having jurisdiction thereof" can be used to take advantage of the new procedures. In the absence of such a clause, parties can bring an existing dispute to arbitration by means of a signed statement in which both parties briefly describe the issue between them and agree to arbitrate under the Construction Rules. On receiving the Demand for Arbitration or Submission Agreement, the Arbitration Association sends each party a copy of a list of proposed arbitrators technically qualified to resolve the controversy. In a construction dispute, these names may include builders, contractors, engineers, architects, other businessmen familiar with the construction industry, and attorneys who customarily represent such clients. In cases involving lesser sums one arbitrator is generally appointed. But in larger cases, it may be preferable to have three neutral arbitrators. Parties are allowed seven days to study the list, cross off any names objected to, and number the remaining names in order of their preference. Where parties want more information about a proposed arbitrator, such information is given on request. When these lists are returned, the American Arbitration Association compares them and appoints the arbitrator whom the parties have approved. Where parties were unable to find a mutual choice on a list, additional lists may be submitted at the request of both parties. If parties cannot agree upon an arbitrator, the Association will make administrative appointments, but in no case will an arbitrator whose name was crossed out by either party be appointed. Arbitrators on AAA panels are generally willing to serve without fee. They volunteer an occasional day as a public service. But after spending two days on a case, the arbitrator must be compensated by the parties. The rate of compensation will then be based upon the amount of service involved and on the number of hearings. Any arrangement for the compensation of an arbitrator is made through the AAA, not directly by him with the parties. After the arbitrator is appointed, the AAA consults with the parties to deter mine a mutually convenient time and place for the hearing. Arrangements are made through the Association, rather than directly between the arbitrator and the parties. The reason for this is twofold: it relieves the arbitrator of routine burdens and it eliminates the danger that, in the course of conversations outside the hearing room, one party may offer arguments on the merits of the case that the other has not had an opportunity to rebut. THE HEARING Arbitration hearings are less formal than court trials. Arbitrators are not required to follow legal rules of evidence. Rather, they are empowered to listen to all evidence that is relevant and material. Arbitrators often accept evidence that might not be permitted in court. But this does not mean that all evidence is believed or given equal weight. Each party has a right to be represented by counsel, and the hearing is conducted in a businesslike manner. It is customary for the complaining party to proceed first with his case, followed by the respondent. This order may be varied, however, when the arbitrator thinks it advisable. Each party must try to convince the arbitrator of the correctness of his position and the hearing is not closed until each has had a full opportunity to present his case. THE AWARD The purpose of the award is to dispose of the controversy finally and conclusively. It must be handed down within thirty days after the close of the hearing. The power of the arbitrator ends with the making of the award; the decision cannot be changed unless both parties agree to reopen the case, unless the applicable law provides for reopening. WHAT IT COSTS TO ARBITRATE As the American Arbitration Association is a nonprofit organization, fees for the arbitration services have been set to cover only the costs of administration. At the filing of a case under the Construction Industry Rules, the claimant must pay a filing fee of $50.00. The balance of the fee is based upon a percentage of the amount of each claim as disclosed at the time of filing, and it is due and payable prior to the appointment of the arbitrator. MISCELLANEOUS PROVISIONS In this booklet, we have indicated the answers to some of the most frequently asked questions about how to proceed with arbitration under the Construction Industry Rules. But other matters may also be of interest. The Rules-a closely-printed sixteen-page booklet-answers other procedural questions. For example: • How is the place of arbitration determined, when the parties are unable to agree? • May a claim be amended after proceedings have begun? • What must an arbitrator do when he discovers that he once had business dealings with one of the parties? • Who may attend hearings? Those who would like copies of the full text of these Rules are invited to write for free copies to the American Arbitration Association at any of its regional offices, or to any of the organizations comprising the National Construction Industry Arbitration Committee. EDUCATION FOR CONSTRUCTION ARBITRATION The participating associations have also made it possible for the National Construction Committee to carry out modest educational programs intended to inform the industry of the use of private arbitration. Speakers, speaker kits and other educational aids are available to all interested persons. These may be obtained by writing to the National Construction Industry Arbitration Committee at the central office of the American Arbitration Association. |