How Business Arbitration Works, Step by Step

Where the rules come from

Arbitration has no single rulebook. The sequence below follows the AAA Commercial Arbitration Rules, the set most Texas business contracts name, with the parts of the Texas Arbitration Act (Tex. Civ. Prac. & Rem. Code ch. 171) that apply regardless of provider. JAMS and other providers follow a similar shape with different rule numbers. Your contract comes first: it can shorten deadlines, fix the number of arbitrators, limit discovery or require a reasoned award, and under AAA Rule R-1 the parties may vary the rules by written agreement.

Two tracks change the pace. Under AAA Rule R-1(b) the Expedited Procedures apply when no claim or counterclaim exceeds $100,000: a single arbitrator, a hearing set within 60 days of the preliminary hearing and normally limited to one day. Under R-1(c) the Procedures for Large, Complex Commercial Disputes apply when any claim is at least $1,000,000, with broader arbitrator authority over information exchange, including depositions, and hearings scheduled in consecutive blocks.

Step 1: the demand and the answer

The claimant starts the case by filing a demand for arbitration with the provider under Rule R-4, together with a copy of the arbitration clause and the filing fee, and serving it on the respondent. The demand is shorter than a court petition: who the parties are, what the dispute is, the amount claimed and the relief sought. The respondent files an answer and any counterclaim; under the AAA rules a respondent who files nothing is treated as denying the claim, and the case proceeds.

If the respondent believes there is no agreement to arbitrate, this is the moment to say so. Section 171.023 of the Texas act lets a party ask a court to stay an arbitration on a showing that no agreement exists, and a party who participates in the hearing without objecting loses that ground under § 171.088(a)(4). Whether the clause holds is a separate question, covered in whether an arbitration clause is enforceable in Texas.

Step 2: choosing the arbitrator

If the contract names a method, it is followed. Otherwise Rule R-13 applies: the AAA sends both sides an identical list of candidates from its roster, usually 10 names, each side strikes the names it objects to and ranks the rest within 14 days, and the AAA appoints the highest mutual choice. A party who does not return the list is deemed to accept every name on it. Where the contract calls for party-appointed arbitrators, each side names one under Rule R-14 and the two choose a chair.

Under § 171.041 of the Texas act, if the agreed method fails or an arbitrator cannot serve, a court appoints a qualified arbitrator on application. Candidates disclose conflicts before appointment and a party may object. This step deserves more attention than it usually gets; see how arbitrators are chosen and why it matters.

Step 3: the preliminary hearing

Soon after appointment the arbitrator holds a preliminary hearing, usually by video or phone, under Rule R-22. This is the scheduling conference of arbitration, and it decides more than any single court hearing does. The arbitrator and counsel set the hearing dates, the deadlines for exchanging documents and witness lists, whether any depositions will be allowed, how experts will be handled, whether dispositive motions may be filed, and whether the award will be reasoned. What is not asked for here is hard to get later.

Step 4: exchanging information

Discovery in arbitration is managed rather than taken as of right. Rule R-23 gives the arbitrator authority to require each side to exchange the documents it relies on, to respond to reasonable requests for documents that are relevant and material to the outcome, and to produce electronic records in a convenient form within agreed search parameters. Rule R-24 lets the arbitrator enforce those orders by drawing adverse inferences, excluding evidence or shifting costs.

The Texas act adds two tools. Under § 171.050 arbitrators may authorize a deposition of a witness who cannot be subpoenaed or cannot attend, or of an adverse witness for discovery or evidence, taken as a district-court deposition would be. Under § 171.051 arbitrators may issue subpoenas for witnesses and records, enforceable like court subpoenas. Interrogatories and requests for admission are not part of the usual arbitration vocabulary.

Step 5: motions and interim relief

Arbitrators can decide some issues before the hearing. The AAA rules permit dispositive motions (Rule R-34) when the arbitrator agrees they are likely to succeed and narrow the case, a tighter gate than summary judgment in court. Rule R-38 allows interim measures to preserve property or the status quo, and Rule R-39 provides an emergency arbitrator for urgent relief before the panel is in place. A party who needs an injunction immediately may still go to court under many clauses, which often carve out that relief.

Step 6: the hearing

The evidentiary hearing is a trial without a courtroom: a conference room or video platform, a court reporter if a party arranges one, and the arbitrator or panel at the head of the table. Under § 171.047 of the Texas act each party is entitled to be heard, to present evidence material to the controversy and to cross-examine any witness. Formal rules of evidence do not apply unless the parties say so; arbitrators admit most exhibits and weigh them. Witnesses testify under oath, direct testimony is often submitted in writing with live cross-examination, and experts are examined like fact witnesses.

Hearings run in consecutive days where possible. When the last witness is done the parties usually submit post-hearing briefs, and the arbitrator declares the hearing closed, which starts the award clock.

Example

Suppose a Dallas software firm and a logistics company fall out over an implementation contract with an AAA clause, a single arbitrator and a claim of about $600,000. The firm files its demand in January; the answer and a counterclaim for the unpaid balance arrive in February. The list goes out in March and the arbitrator, a retired commercial judge, is appointed in April. The preliminary hearing sets two depositions each, document exchange through July, expert reports in August and a three-day hearing in October. Briefs are in by mid-November, the hearing is closed, and the reasoned award issues in December. Nothing in that sequence was public, and no court was involved until the winner filed to confirm.

Step 7: the award, and what follows it

Rule R-47 requires the award within 30 calendar days after the hearing closes unless the parties agree or law provides otherwise. Rule R-48 requires it in writing, signed by a majority of the panel; a reasoned award, one that explains why, is given only if the parties asked for it before appointment or the arbitrator chooses to write one. The award may include interest, and attorney's fees if all parties requested them or the contract or law allows (Rule R-49). The arbitrator also allocates the provider's fees and the arbitrator's compensation between the parties in the award.

An award can be corrected for a clerical or computational error. Under § 171.054 of the Texas act a party has 20 days after delivery to ask the arbitrators to modify or correct it, and the other side has 10 days from notice to object. Beyond that, the arbitrator's job is done.

The award binds the parties but is not yet a judgment. The winner applies to a court to confirm it, and the loser has a short window to seek vacatur on narrow grounds. Those two steps are covered in enforcing an arbitration award in Texas and whether an arbitration award can be appealed or vacated.

What to do when the demand arrives

• Calendar the answer deadline and the list-return deadline; missing the second one hands the other side your arbitrator choices.
• Decide at once whether you will contest the agreement to arbitrate, because participating without objection waives it.
• Preserve documents and email as you would for a lawsuit; the arbitrator can draw adverse inferences from gaps.
• Go into the preliminary hearing knowing what discovery you need and why, with the material issues it goes to.

Tina Wysk represents businesses in AAA and other commercial arbitrations in Dallas, from the demand through confirmation of the award.