By: Patrick Ouellette, ALR Senior Editor, 2021

Arbitration is a voluntary process. Both parties are required to agree to arbitration in order for an arbitration agreement to be voluntary. Therefore, it stands to reason that parties should approach arbitration with openly and readily. However, in practice, anytime a disagreement becomes adversarial, there is a chance that one of the parties may attempt to stall or derail the proceedings. When this happens, a party is acting in bad faith, or not in the spirit of the agreement. Bad faith can be exhibited through numerous different ways. A party can fail to pay the arbitration fees that this party previously agreed to. The party may attempt to slow proceedings by asking for numerous continuances. Sometimes a party will just not show up to the proceedings when they are scheduled.

Regardless of the bad faith act, arbitration must proceed. However, arbitration faces a problem that courts do not face when a party is acting in bad faith. The courts have a much simpler remedy that arbitration does not have. Courts are able to render a default judgment to the party that has complied with all of their requisite duties.[1] A default judgment is a binding judgment in favor of either party based on failure to take action by the other party. Normally, a party failing to show up to court on the day of the trial will result in the default judgment being rendered.

However, arbitration does not have a default judgment option for the arbitrator. Instead, arbitrators are not allowed to enter judgment purely because a party “failed to respond, appear, or defend.”[2] Instead, an arbitrator must still hear the case, and only make a ruling for a party when that party has met the burden of proof that is required in that case.[3] While this does make the presenting parties job easier, since there is no opposing side cross-examining the information that is being presented, there are still drawbacks. First, the arbitrator may be stricter to a party that is presenting unopposed.[4] Occasionally, the arbitrator may unofficially be forced to act as the other side, asking questions and refuting proof that is put forward by the party that is present.[5] Additionally, the party that was absent may join the proceedings at any time, with no penalty for their absence.[6] They are still entitled to present their evidence to the arbitrator. Finally, parties that do not pay their fees force the party that is following the arbitration agreement to front the costs for the proceeding. [7]Although these fees can be recouped upon judgment being rendered by the arbitrator, this still requires a greater sum of money to be laid out prior to judgment, which could mean greater financial risk if a party proves insolvent.

Arbitration needs a system to penalize parties that attempt to stall arbitration proceedings in an effort to drag on proceedings. Otherwise, arbitration can expect more bad actors to continue to slow down a process that has gained popularity due to the expediency at which it can resolve disputes.

[1] Fed R. Civ. P. 55

[2] National Arbitration Forum Code of Procedure R. 36(e)

[3] Ted Frank, The Absent Defendant: Arbitration vs. Court, available at https://www.overlawyered.com/2008/06/the-absent-defendant-arbitration-vs-court/

[4] Default Procedure In Arbitration Proceedings Under the American Arbitration Association Rules, available at https://www.stimmel-law.com/en/articles/default-procedure-arbitration-proceedings-under-american-arbitration-association-rules

[5] Id.

[6] Id.

[7] Id.