Modeling Legally Binding Commercial Arbitration: A Construction Industry Application

Abstract

Contracts are designed to govern the relations between business partners, allocate risk among them, and resolve conflicts that might arise during the course of the contract. Of course, a contract cannot resolve all conflicts as it cannot predict every possible scenario and hence, dispute resolution mechanisms have been developed to assist. Arbitration, among these mechanisms, is considered the most efficient legally binding dispute resolution mechanism. Since initiating an arbitration case against business partners often severs the business relationship between them, predicting the arbitrator's decision becomes valuable to the arbitrating parties. After identifying the shortfalls of the existing litigation and arbitration models, the arbitration process is broken down based on the players; the disputing parties, and the arbitrator. First, the disputing parties' decision-making process is modeled based on the latest financial management theory, wealth maximization. The proposed additive utility model depicts the arbitrating party's utility change, resulting from the possible outcomes of engaging into an arbitration. Most importantly, it preserves the industry practicality while, incorporating direct short-term factors, and indirect long-term factors. The proposed model is the first model that could assist firms top management deciding to file an arbitration case against their business partners. Second, the arbitrator's award is modeled into two stages; evidence admissibility, and, evidence evaluation. While arbitrators currently admit evidence in an unsystematic way, this research proposes an admissibility framework preserving the practice subjectivity yet aligning it with the widely deployed rules of arbitration. This research further proposes an evidence evaluation model, providing a rapid answer to the famous commercial arbitration battle, discovery. While the current arbitrators' practice in allowing discovery is not systematic, and can be perceived as subjective, the proposed optimization model is a tool that could systematically assist arbitrators trading between the arbitration key characteristic, efficiency, and justice. Overall, this research aids the different parties of commercial arbitration in making more educated decisions related to commercial arbitration. Moreover, it paves the ground for innovative research ideas related to arbitration in particular, and dispute resolution in general.

Date of Award	May 2017
Original language	American English
Supervisor	Abdulla Galadari (Supervisor)