International NEWS

Splitting the Baby: A New AAA Study

March 9, 2007-- A new statistical study undertaken by the American Arbitration Association reinforces earlier findings while it shatters--once again--a recurring myth in the dispute resolution community. The myth: that arbitrators too often "split the baby"--that is, that they divide monetary awards down the middle when awarding cases. The fact: not so.

William K. Slate II, AAA president and CEO, delivered the results of the study in a presentation before the Swiss Arbitration Association in Geneva at the end of January. The split-the-baby myth, he said, is perpetuated because some observers of the arbitration process fail to see the complex nature of arbitral decision-making, believing it arbitrary rather than carefully researched, the easy way to please everyone rather than a tough and studied pronouncement.

The research was done on the commercial arbitration cases administered by the International Centre for Dispute Resolution in 2005 that were awarded. The files of these cases (numbering 111) were reviewed for final claim, counterclaim, and award information, and the monetary value of each award was measured against the claim and counterclaim amounts filed. The comparisons were charted and analyzed to reveal trends in the awards.

The results are shown in the accompanying graph. Only 7% (8 cases) were awarded in the midrange (41-60% of their filed claim amount); 93% were awarded outside the claim midrange.

The "U" shape of the graph demonstrates the greater incidence of arbitral awards in which one party clearly prevails over "split" awards. On one side of the chart, the first two bars show that 21 cases (19%) were totally denied while 13 (12%) received up to 20% of their claim value. On the other side of the chart, 46 cases (41% of the sample) were awarded more than 80% of their claimed amount and 15 (13.5%) received between 61 and 80% of their claims.

Other trends observed in the results of the study include the following:

• Lower claim amounts tended to correlate to a higher rate of arbitral award while awards in cases with higher claim amounts ranged across the board. In cases with claims up to $75,000, for example, 53% were awarded more than 80% of the claim, 68% in the $75,001-$499,999 claim range. When claims were $1 million or higher, however, 21% were awarded at the high 80% level.
• Nearly two-thirds (63%) of the counterclaims filed in the study sample were denied; only one counterclaim (4%) received an award in the 41-60% midrange.

Earlier AAA research had yielded similar results. A 2001 survey of all domestic and international commercial cases awarded in 2000 found that only 9% of claims were "split," or divided near the halfway mark, and less than 4.5% of counterclaims.

Awards in the majority of cases studied were decisive, Slate concluded. AAA and ICDR arbitrators typically did not "split the baby" in either the claim or counterclaim categories.