How Arbitration Works Before the American Arbitration Association (AAA): A Practical Guide for Contract Disputes

Many business and commercial contracts include a clause requiring disputes to be resolved through arbitration before the American Arbitration Association (AAA) instead of traditional court litigation. These clauses are common in commercial agreements, employment contracts, construction contracts, professional services agreements, franchise agreements, and consumer contracts.

If you’ve never been through an AAA arbitration, the process can feel unfamiliar—but it is structured, rules-based, and often faster than court litigation.

Below is a plain-English, accurate overview of how standard arbitrations before the American Arbitration Association typically work, why arbitration clauses are used, and what parties should expect when a contract dispute is diverted from court to arbitration.

This article is for general informational purposes only and is not legal advice.

What Is the American Arbitration Association (AAA)?

The American Arbitration Association (AAA) is one of the largest and most widely used private dispute resolution organizations in the United States. It administers arbitrations under established procedural rules, including:

·       Commercial Arbitration Rules

·       Construction Industry Arbitration Rules

·       Employment Arbitration Rules

·       Consumer Arbitration Rules

The AAA does not decide cases itself. Instead, it:

·       administers the process,

·       appoints or facilitates selection of arbitrators,

·       manages deadlines and filings,

·       and ensures compliance with the applicable rules.

Why Contracts Require AAA Arbitration Instead of Litigation

Arbitration clauses are frequently used to substitute arbitration for court litigation because arbitration can offer:

·       faster resolution than courts,

·       more predictable scheduling,

·       private proceedings (no public court file),

·       specialized decision-makers,

·       streamlined procedures,

·       nationwide enforceability under the Federal Arbitration Act (FAA).

Once parties agree to arbitrate in a contract, courts will generally enforce that agreement and compel arbitration if a dispute arises.

How an AAA Arbitration Begins

1. A Dispute Arises Under the Contract

A disagreement arises over:

·       breach of contract,

·       payment disputes,

·       performance issues,

·       termination provisions,

·       indemnity obligations,

·       or other contract-based claims.

Instead of filing a lawsuit, the contract requires the dispute to be arbitrated before the AAA.

2. Filing a Demand for Arbitration

The party initiating the case files a Demand for Arbitration with the AAA, which typically includes:

·       a description of the dispute,

·       the legal claims asserted,

·       the relief sought (damages, declaratory relief, etc.),

·       the applicable arbitration clause,

·       and the required filing fee.

The AAA then serves the Demand on the opposing party.

3. Answer and Counterclaims

The responding party files an Answer, which may:

·       deny liability,

·       assert defenses,

·       and include counterclaims arising from the same contract.

At this stage, the dispute formally moves into arbitration administration rather than court litigation.

Selection of the Arbitrator

Single arbitrator vs. panel

Most standard AAA arbitrations involve:

·       one arbitrator for smaller or moderate disputes, or

·       a three-arbitrator panel for complex or high-value cases.

Arbitrator selection process

The AAA typically:

1.     Provides a list of proposed arbitrators with relevant experience

2.     Allows each side to rank and strike arbitrators

3.     Appoints the arbitrator (or panel) based on the parties’ selections

Arbitrators are often:

·       experienced attorneys,

·       former judges,

·       or industry specialists (e.g., construction, finance, employment).

Preliminary Conference and Scheduling

Once the arbitrator is appointed, a preliminary conference is held (usually by phone or video).

At this stage, the arbitrator:

·       sets the procedural schedule,

·       establishes discovery limits,

·       addresses motions,

·       confirms hearing format (in person or remote),

·       and issues a procedural order governing the case.

AAA arbitrations are generally more flexible and faster than court scheduling.

Discovery in AAA Arbitration

Discovery in AAA arbitration is typically more limited than in court litigation, but still meaningful.

Common discovery tools include:

·       exchange of key documents,

·       limited written discovery,

·       depositions (often fewer than in court),

·       expert disclosures (if applicable).

The arbitrator controls discovery scope and resolves disputes. The goal is efficiency, not exhaustive litigation-style discovery.

Motions Practice in Arbitration

AAA arbitrations allow motions, but usually in a more streamlined fashion.

Common motions include:

·       motions to dismiss certain claims,

·       motions for summary disposition (limited),

·       discovery-related motions,

·       motions to exclude evidence.

Arbitrators often discourage excessive motion practice unless it meaningfully advances resolution.

The Arbitration Hearing (The “Trial”)

The arbitration hearing is similar to a bench trial—but more flexible.

Typical features:

·       no jury (the arbitrator decides),

·       relaxed evidentiary rules,

·       testimony from witnesses and experts,

·       presentation of documents and exhibits,

·       opening statements and closing arguments (often abbreviated).

Hearings may be:

·       in person,

·       fully remote,

·       or hybrid.

The arbitrator controls the hearing format and time limits.

The Arbitration Award

After the hearing concludes, the arbitrator issues a written arbitration award.

Key characteristics:

·       awards are usually final and binding,

·       findings may be brief or detailed, depending on the rules and agreement,

·       damages and relief are specified,

·       very limited grounds for appeal or vacatur exist under the FAA.

Courts will generally confirm arbitration awards and enter judgment unless extraordinary circumstances exist.

Costs of AAA Arbitration

AAA arbitration involves costs that do not exist in court litigation, including:

·       filing fees,

·       case management fees,

·       arbitrator hourly or daily fees,

·       hearing costs.

Who pays?

·       Fees are typically split between the parties unless the contract or arbitrator allocates them differently.

·       In some cases, the arbitrator may award costs or fees to the prevailing party.

Cost allocation is often a strategic consideration when arbitration clauses are drafted or enforced.

Confidentiality of AAA Arbitration

One of arbitration’s key advantages is privacy.

·       Proceedings are not public.

·       Filings are not court records.

·       Hearings are closed to outsiders.

This is especially important in business, employment, and commercial contract disputes.

Why Experienced Counsel Matters in AAA Arbitration

AAA arbitration is not informal negotiation—it is a legal adjudication with binding consequences.

An experienced arbitration attorney will:

·       enforce or challenge arbitration clauses properly,

·       select appropriate arbitrators,

·       manage limited discovery strategically,

·       present evidence efficiently,

·       protect the record for enforcement or challenge,

·       and maximize leverage for settlement or award.

Mistakes in arbitration are often irreversible due to limited appeal rights.

Arbitration vs. Litigation: Key Differences

Litigation	AAA Arbitration
Public court process	Private proceeding
Judge or jury	Arbitrator
Broad discovery	Limited discovery
Longer timelines	Faster resolution
Full appeal rights	Very limited appeals

 

Key Takeaways: AAA Arbitration in Contract Disputes

·       AAA arbitration is commonly required by contract

·       It substitutes private arbitration for court litigation

·       The process is rules-based but flexible

·       Arbitrators—not judges or juries—decide the case

·       Awards are final and enforceable

·       Experienced counsel is critical

Need Help With an AAA Arbitration?

If your contract requires arbitration before the American Arbitration Association, working with experienced arbitration counsel can make the difference between:

·       control and costly missteps,

·       efficiency and delay,

·       enforceable relief and missed recovery.