“Naked” Arbitration: Should You Go “Bare”?

By Leslie King O’Neal

Benefits of Non-Administered Arbitration

Non-administered arbitrations offer parties greater autonomy since parties  decide the procedural rules, the arbitration seat and how to select arbitrators. Generally, the parties select the arbitrators directly –each party selects an arbitrator and those two select the chair. The parties or the arbitrators perform all the administrative functions for the proceedings. The main benefits of non-administered arbitration are cost savings and flexibility. This process may be more efficient and may allow parties to have more control over confidentiality.  Parties may adopt or adapt existing rules or may create their own rules for the proceeding. Adopting established procedures from an ADR organization may reduce disputes about the procedures to be used, making the process smoother and more efficient.

CPR Rules for Non-Administered Arbitration

The Center for Dispute Prevention and Resolution (CPR) has special rules for non-administered arbitrations.[1] Under these rules, CPR provides little or no oversight or administrative support unless parties request it.[2]  In international arbitration, the United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules are frequently used in international non-administered arbitrations.[3] CPR also has rules for international non-administered arbitrations.[4] To use CPR or UNCITRAL procedures, the arbitration agreement should reference or incorporate the rules.

 Non-Administered Arbitration Requires Cooperation and Expertise

Achieving the cost savings and flexibility in “bare arbitration” requires considerable cooperation and expertise from the parties and their counsel. Without such cooperation the proceedings may bog down over issues such as arbitrator selection, payment, or scheduling, requiring court intervention and causing delay. The primary factors to consider in choosing non-administered arbitration are the sophistication and working relationship of the parties and their counsel. Selecting an experienced arbitrator or panel chair is critical since that person will be responsible for administrative duties in addition to the normal arbitration requirements.[5]

Disadvantages of Non-Administered Arbitration

• Lack of Cooperation: As noted above, cooperation is key in a successful ad hoc arbitration. However, after a dispute arises, parties and counsel may find cooperating with the opposing side challenging. This can cause problems in drafting or agreeing on the procedural rules governing the process, selecting arbitrators and other issues. Such lack of cooperation can delay or derail the process.
• Payment: Not having an arbitral institution responsible for collecting payment places arbitrators in the awkward position of collecting their fees from the parties.  A party’s failure to pay fees, requiring the arbitrators to pursue payment, could affect the arbitrators’ neutrality.
• Disclosures and Conflicts of Interest: Arbitral organizations such as AAA and JAMS require prospective arbitrators to make full disclosure of potential conflicts of interest before they are appointed.[6] These organizations also have rules allowing parties to object to arbitrators fo r partiality or conflicts of interest.[7]
  • California has adopted its own ethical standards for arbitrators.[8]  The Revised Uniform Arbitration Act (RUAA)[9], adopted by twenty states[10] and the District of Columbia, requires arbitrators to disclose financial or personal interests in the arbitration’s outcome and existing or past relationships with parties, counsel, witnesses or other arbitrators.[11]  However, to ensure the RUAA applies the arbitration agreement should incorporate the state arbitration statute. A “choice of law” clause selecting a particular state’s law may not be sufficient. See Post: FAA or State Arbitration Law: Which Applies and When? https://theconstructionadrtoolbox.com/2025/05/which-applies-faa-or-state-arbitration-law/ noting the conflict among federal circuits whether a choice-of-law clause incorporates state arbitration law into contracts, displacing the FAA.
• Not All State Arbitration Laws Require Disclosures:
  • The “Uniform Arbitration Act,”[12] currently adopted by twelve states[13], does not include these disclosure requirements.  Also some states have adopted unique arbitration statutes, often based on the FAA or the UAA, which may not require arbitrator disclosures.[14] Without specific rules or state law requiring disclosure, a prospective arbitrator’s duty to disclose and a party’s ability to object to the arbitrator’s service is less clear.  Non-administered arbitration agreements should address arbitrator disclosures and objections.
• No Independent Enforcement Method: Even if the arbitration agreement states the proceedings will follow specific organization rules, such as the AAA or JAMS Construction Arbitration Rules, in an ad hoc proceeding, there is no independent organization to enforce those rules. This places the arbitrators in the difficult position of enforcing rules against the parties while attempting to maintain neutrality.
• Failure to Participate in Arbitration
  • If a party refuses to arbitrate a dispute, the FAA and state arbitration statutes provide that courts may compel arbitration.[15] However, orders compelling arbitration as a dispute resolution method don’t require parties to participate in the arbitration process by attending the hearing (unless the party is subpoenaed as a witness).  
• No Automatic Default for Failure to Participate
   Unlike litigation, a party’s failure to participate in arbitration does not result in a “default” on liability. Neither the FAA nor the UAA or RUAA provide for “default” in arbitration nor do they provide guidance on how to proceed in such situations. Many arbitration rules allow arbitration to proceed even if a party fails to participate but they require the award to be based on evidence presented.[16] Arbitration agreements without incorporated rules leave the arbitrator and parties to navigate a default situation without guidance. It’s important to document the arbitration process, since parties who do not participate in the hearing may challenge awards under the FAA.
  

Takeaways

• “Bare” or non-administered arbitration (that is, arbitration without an ADR organization administering the process) can provide cost savings and give parties more flexibility in designing the process.
• Successful non-administered arbitration requires considerable cooperation and expertise from parties and counsel.  It’s best used with sophisticated parties who have a good working relationship.
• Lack of rules and lack of an organization to enforce them can create problems and delays in a non-administered arbitration. These problems may outweigh the cost savings realized.
• Ad hoc arbitration agreements require considerable care in drafting to avoid having the process derailed by disputes.

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[1] CPR Non-Administered Arbitration Rules (2018). https://drs.cpradr.org/rules/arbitration/non-administered/2018-cpr-non-administered-arbitration-rules.

[2] If the parties request it, CPR may assist with arbitrator selection, in which case it charges a fee. See CPR Rules above.

[3] https://uncitral.un.org/en/texts/arbitration/contractualtexts/arbitration

[4] https://drs.cpradr.org/rules/arbitration/non-administered/2018-international-non-administered-arbitration-rules

[5] T. Stipanowich and A. Schmitz, Ad Hoc Arbitration vs. Arbitration Supported by an Institution, (Ch.2.D.3) Arbitration Practice, Policy and Law (Aspen 2023).

[6] Rule 7.3, CPR Non-Administered Arbitration Rules requires arbitrators to disclose “any circumstances that might give rise to justifiable doubt regarding the arbitrator’s independence or impartiality.” 

[7] R-20, AAA Construction Arbitration Rules; Rule 15(i) JAMS Construction Arbitration Rules

[8] See CA Code of Civil Proc. §1281.85 https://courts.ca.gov/cms/rules/index/ethics/ethics1

https://www4.courts.ca.gov/documents/ethics_standards_neutral_arbitrators.pdf

[9] Uniform Law Commission, RUAA https://www.uniformlaws.org/viewdocument/final-act-2?CommunityKey=a0ad71d6-085f-4648-857a-e9e893ae2736&tab=librarydocuments

[10] AK, AZ, CA, CT, FL, HI, KS, MI, MN, NV, NM, NC, ND, OK, OR, PA, TN, UT, WA, WV.

[11] See RUAA §12

[12] Uniform Arbitration Act, https://cbar.org.br/site/wp-content/uploads/2014/12/Uniform_Arbitration_Act_UAA_1956.pdf.

[13] DE, GA, ID, IN, IA, KY, MD, MT, NE, SC, SD, VA.

[14] See e.g. AL Code §6-6-1 through 6-6-16; MA Gen. Laws, Ch. 251, §§1-19.

[15] FAA, 9 USC §4.

[16] See R-32, AAA Construction Industry Arbitration Rules; Rule 22(j) (“An award shall not be made solely on the default of a party.” Rule 22(j) JAMS Construction Arbitration Rules (“The arbitrator may not render an Award solely on the basis of the default or absence of the Party . . . .” Article 26, ICDR, International Dispute Resolution Procedures. Article 26.2, International Court of Arbitration Rules.