ARBITRATION : Are its Perceived Advantages Real?

1. ARBITRATION:Are its PerceivedAdvantages Real? By: Judith A. Miller Senior Vice President & General Counsel Bechtel Group, Inc.

2. Why Bechtel “Prefers” Arbitration? Relative speed of the proceedings Economical alternative to litigation in court Limited and expedited discovery Influence over choice of decision-maker with subject-matter expertise Avoidance of “home-town” effect of local courts Finality due to limited grounds for appeal Privacy ARBITRATION: Are its Perceived Advantages Real?2

3. Bechtel’s Serious Concerns Regarding Viability of Arbitration Arbitration has not lived up to its reputation in many Bechtel cases. Has created credibility issue with our business clients who have felt burned by the process. Too many cases have lingered on for too long. Bifurcation of hearings is inefficient. Short trial days and/or trial weeks to accommodate arbitrator schedules cause delay. ARBITRATION: Are its Perceived Advantages Real? 3

4. Bechtel’s Serious Concerns Regarding Viability of Arbitration (continued) “Let it all in” approach to evidence unnecessarily prolongs proceedings. One case has been pending 5 years with the parties appearing before the panel more than a dozen separate times thus far. Arbitration costs are often out of proportion to the value of the dispute. Time = $; delay = cost Added expense of 1-3 arbitrators and administrative fee not usually justified by added efficiencies. ARBITRATION: Are its Perceived Advantages Real? 4

5. Bechtel’s Serious Concerns Regarding Viability of Arbitration (continued) Discovery is often too wide-ranging in arbitration. Arbitrators tend to err on the side of allowing too much discovery. Seem to have forgotten need for expedited proceedings which must include limited discovery. Seem overly concerned about whether award can be vacated; however, under FAA the award can only be overturned for failure to hear “material” evidence, not “relevant” evidence. ARBITRATION: Are its Perceived Advantages Real? 5

6. Bechtel’s Serious Concerns Regarding Viability of Arbitration (continued) Arbitrators generally have good knowledge of the business, but often are not as aware as they should be about governing legal principles. Lack of resources/clerks may be an issue. Finality, privacy and avoidance of “home-town” effect continue to be positives for Bechtel. ARBITRATION: Are its Perceived Advantages Real? 6

7. What is Bechtel Doing to Address Issues with Arbitration? Rethinking whether Arbitration is preferred to litigation in some jurisdictions. Drafting arbitration clauses that limit discovery and expedite proceedings. Focusing carefully on arbitrators’ reputation for efficiency and control of proceedings when making selection. ARBITRATION: Are its Perceived Advantages Real? 7

8. What Can Arbitrators Do to Address These Issues? Worry less about vacation of award and more about efficiency of process. Employ techniques to move proceedings along, such as: Pre-hearing conferences to create expedited discovery plan, with emphasis on e-discovery. Impose reasonable limits on depositions and e-discovery. Require that discovery closes before hearings start. Do not bifurcate hearings. Use chess clock. ARBITRATION: Are its Perceived Advantages Real? 8

9. What Can Arbitrators Do to Address These Issues? (continued) Schedule minimum 8-hour days and 4-day weeks Consider innovative techniques such as allowing counsel to present direct testimony and have witnesses subjected only to cross, perhaps in a group if the issues warrant. Just as the judiciary and Bar have responded to criticisms of litigation, so must the users, practitioners and sponsors of arbitration respond to the issues facing arbitration. Rocket dockets Creation of complex case divisions in many courts 2007 update to 1998 Civil Trial Practice Standards of the ABA Litigation Section. ARBITRATION: Are its Perceived Advantages Real? 9