Arbitration Fight

As many await reaction by the U.S. Supreme Court to a request for review of lower court decisions concerning Delaware's controversial and confidential business arbitration program, ILR's Rocco Scanza recommends change for the state's current system.

"Delaware would be wise to implement a policy of private hearings and public awards," said the executive director of the Scheinman Institute on Conflict Resolution.

"Although hearings could be conducted with safeguards for privacy, the arbitration awards could and should be made available to the public," he said in an interview.

Many will be watching what happens in Delaware, as it could influence arbitration's role in private business nationally. Some predict that opening arbitration information to the public would result in more companies relocating to countries that settle business disputes behind closed doors.

Businesses across the country are increasingly seeking an alternative to litigation through alternative dispute resolution processes such as arbitration, which typically costs less and takes less time than a traditional court process, Scanza said.

Historically, one of arbitration's major selling points is that the proceedings were private, he said. For decades, American businesses viewed those features as a way of resolving disputes without embarrassing publicity.

As the use of arbitration expanded in the past 20 years, critics of the process complained that dispute secrecy violates the public's need to know. Some say that transparency would help alert the public to defective products, unethical business practices and other issues.

Scanza said that similar criticism leveled at securities industry arbitration resulted in a major change -- only parties to the dispute and their representatives could attend hearings, but the arbitration awards became publically available.

The American Arbitration Association's Employment Arbitration Program follows a protocol of private hearings and publically available awards, he said.