The American Arbitration Association (AAA) has introduced alternative fee arrangements, with the expressed intention of assisting parties control costs.
The alternative fee arrangement (AFA) option is available for "eligible cases", namely any two party commercial or construction or complex arbitration case which falls outside the AAA's fast-track procedure (where fixed fees were already available).
Parties with AAA arbitration agreements can choose from two AFA options prior to appointing an arbitrator:
1. A fixed fee arrangement, with proposed staged fixed fees for the pre-hearing, hearing and post-hearing phases of the arbitration;
2. A capped fee arrangement, with a proposed fee cap for the entire arbitral process.
Both options mus be approved by the parties and, as details of the proposed fees are provided prior to appointment of the arbitrator, can be taken into account in arbitrator selection, with the AAA inviting arbitrators from its panel to submit their fee proposals to the parties. However, the rules do provide scope for discussion with the parties and, ultimately, termination of the AFA or fee revision, where the dispute turns out to be more complex than originally thought and so do not provide absolute certainty on cost.
The extent to which the AFA options are taken up, and to which they do assist in parties in controlling arbitration costs remains to be seen, as does whether the other major arbitral institutions introduce similar measures of their own in due course. As with any arbitral process, adoption of these measures requires the consent and cooperation of both parties. This move by the AAA does, however, represent an interesting development, founded in the results of a user survey and looking to transpose trends from external legal adviser fee structures into arbitrator practice.
Lindsey specialises in complex cross-border disputes, international and domestic arbitration, aviation, commercial and finance disputes. She regularly advises clients on dispute resolution mechanisms and arbitration agreements and assists with the provision and implementation of funding solutions, allowing clients access to participation in both court litigation and arbitration.
The AAA-ICDRSM is the first national arbitral organization to offer an alternative fee arrangement (AFA) option, adding cost savings, fee transparency, and predictability to the arbitration process.