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Most commercial arbitrations are administered by an arbitral association such as the American Arbitration Association (AAA), JAMS, or the International Institute for Conflict Resolution and Prevention (CPR). These organizations typically require the party commencing the arbitration to pay a filing fee to get the arbitration started. Once the arbitrator has been selected, the arbitrator usually holds a case management conference and issues an order setting a schedule for the arbitration. At that time or shortly afterward, the arbitral association asks the parties to deposit funds to cover the arbitrator's anticipated fees and expenses. The AAA and JAMS invoice each party for its share of this amount and expect payment within a stated time frame in advance of the hearing. In this regard, Rule 52 of the AAA Commercial Arbitration Rules states:
The AAA may require the parties to deposit in advance of any hearings such sums of money as it deems necessary to cover the expense of the arbitration, including the arbitrator's fee, if any, and shall render an accounting to the parties and return any unexpended balance at the conclusion of the case.
Sometimes, one of the parties is unable or unwilling to pay its share of the arbitration fees and expenses. This article explores the options available to an arbitrator in those circumstances.
What Do the Rules Say?
When a party refuses to pay its share of arbitration expenses, the first place to look for guidance is the rules the parties selected to govern the arbitration. These rules are usually identified in the arbitration agreement itself or are provided by the arbitral association that the parties have selected to sponsor or administer their case. For example, Rule 54 of the AAA Rules provides a framework for arbitrators faced with a non-paying party:
If arbitrator compensation or administrative charges have not been paid in full, the AAA may so inform the parties and order that one of them may advance the required payment. If such payments are not made, the arbitrator may order suspension or termination of the proceedings. If no arbitrator has yet been appointed, the AAA may suspend the proceedings.
Thus, Rule 54 allows an arbitrator to order that one party cover the other's costs. If that party refuses, the arbitrator...