Who Pays the Costs of Consumer Arbitration?

One of the first practical questions consumers may have about arbitration is: Who pays for it?

Arbitration can involve several different types of expenses, including administrative filing fees, arbitrator compensation, attorney fees, and other case-related costs. These expenses are not necessarily treated the same way.

Responsibility for a particular cost can depend on the arbitration agreement, the organization administering the case, the applicable arbitration rules, and governing law.

Consumer Arbitration May Have Special Fee Rules

Major arbitration providers have special fee rules for qualifying consumer arbitrations.

Under the American Arbitration Association's Consumer Arbitration Rules and fee schedule, the consumer's administrative filing obligation is capped. The business pays the remaining administrative fees and arbitrator compensation. Fee waivers may also be available to qualifying consumers who cannot afford the required filing fee.

JAMS also maintains Consumer Minimum Standards for qualifying arbitrations arising from pre-dispute consumer agreements. When a consumer initiates a qualifying arbitration against a company, JAMS limits the amount the consumer must pay and requires the company to bear the remaining JAMS fees and the arbitrator's professional fees.

Because arbitration-provider rules and fee schedules can change, current rules should be reviewed rather than relying on an older fee amount.

Filing Fees and Arbitrator Compensation Are Different

The initial filing fee is only one potential arbitration expense.

An arbitration organization may charge administrative fees for managing the case. The arbitrator also receives compensation for handling and deciding the dispute.

Under qualifying consumer rules, the business may be responsible for most of these provider and arbitrator costs even when the consumer initiated the arbitration.

What Does the Arbitration Agreement Say?

The arbitration provision in the underlying contract remains important.

It may identify the arbitration organization, incorporate particular rules, and address how certain costs will be allocated.

Some agreements may provide that the business will pay some or all arbitration expenses.

The arbitration agreement and the current rules of the administering organization are therefore the starting point for understanding how arbitration costs are allocated.

Are Attorney Fees Included in Arbitration Fees?

No. Attorney fees are different from arbitration-provider administrative fees and arbitrator compensation.

The fact that a business pays provider fees or arbitrator compensation does not automatically mean that the business must also pay the consumer's attorney fees.

Whether attorney fees may ultimately be awarded can depend on the claims asserted, applicable statutes or other law, the contract, the arbitration agreement, and the arbitrator's authority.

Some consumer-protection laws may authorize attorney-fee awards when their legal requirements are satisfied.

What About Other Case Expenses?

An arbitration may involve additional expenses separate from provider fees and attorney fees.

Depending on the case, those expenses may relate to records, expert witnesses, transcripts, depositions when permitted, hearings, or presentation of other evidence.

Whether those expenses arise, who initially pays them, and whether any may later be recovered depends on the proceeding and applicable law.

Not Every Arbitration Uses the Same Fee Rules

Different rules and fee schedules can apply to consumer, commercial, employment, mass, international, and other types of arbitration.

A fee quoted for commercial arbitration should not automatically be assumed to apply to an individual consumer dispute.

For consumer arbitration, the relevant arbitration agreement and current consumer rules of the administering organization provide the appropriate starting point.

Why the Distinction Matters

Consumers sometimes assume that private arbitration means they must personally pay the full cost of hiring an arbitrator.

That is not necessarily the case.

Major arbitration providers have special cost rules for qualifying consumer cases that may place most administrative and arbitrator expenses on the business.

Those rules should not be confused, however, with an automatic right to recover attorney fees or every other expense associated with a dispute.

Understanding which type of fee is being discussed is an important part of understanding the potential costs of consumer arbitration.