Faced with a growing number of large arbitration cases, U.S. regulators are launching a pilot program that allows adversaries in such cases to customize the arbitration process.
The Financial Industry Regulatory Authority (FINRA) announced that it has launched a pilot program specifically designed for arbitration cases involving claims of US$10 million or more. The voluntary program enables parties to customize the administrative process to better suit special needs of a larger case and allows them to bypass certain FINRA arbitration rules.
For example, under the program, participants can take additional control over the method of arbitrator appointment and the qualifications of arbitrators; hire non-FINRA arbitrators for their case; develop their own procedures for exchanging information prior to the hearing; have expanded discovery options such as depositions and interrogatories; and, choose from a wider selection of facilities.
Participation in the pilot program is open to all cases; but in order to be eligible, all parties will be required to pay for any additional costs (such as enhanced facilities or additional arbitrator honorariums) and must be represented by counsel, so it may make more sense for larger cases.
“In response to the increasing number of very large cases, we wanted to introduce a more formal approach to give parties greater flexibility and more control over the administration of their case,” said Linda Fienberg, president of FINRA Dispute Resolution.
FINRA says it will send a letter to parties in cases involving claims of US$10 million or more to solicit participation in the pilot program.
Last year, the Investment Industry Regulatory Organization of Canada (IIROC) made a couple of key changes to its arbitration program in order to try and improve its usefulness. It bumped up the maximum award amount to $500,000 from $100,000; and gave investors the option to eliminate the arbitrator’s discretion to award costs.