The South Australian Magistrates Court has invited me to prepare a one-page flyer to be handed out to parties in cases which may be suitable for pendulum arbitration, and now approved that document. The Word version is thus: MC Flier
The text is as follows:
A Faster and Less Expensive Alternative to Litigation or Conventional Arbitration
Pendulum arbitration (also known as baseball arbitration) is a type of arbitration that has been extensively and successfully used in the United States to resolve disputes more quickly and with less cost than litigation or conventional arbitration. It is also now available in South Australia for appropriate cases.
What is pendulum arbitration?
In this form of pendulum arbitration, the parties attend a one-day hearing in which they each put their case. At the end of the day, each party hands the arbitrator a proposed draft award, and the arbitrator chooses one of these drafts as the final award, without modification.
How does it work in practice?
Prior to the hearing, each party puts in a written statement of its case, including any material on which it wishes to rely. There is no discovery of documents.
At the hearing, each party has the opportunity to further explain its case on a “chess clock” basis of equal time. There is no cross-examination of witnesses, and the legal rules of evidence do not apply.
There is then a pause of approximately 30 minutes, whilst each party decides where to pitch its draft award. The form of the draft award is simply that one party pays the other party the stated amount of money, inclusive of any entitlement to interest and costs. They then each hand in their draft award to the arbitrator in a sealed envelope.
In practice, both parties typically put in draft awards which are relatively reasonable and conservative assessments of their entitlements, in order to increase the likelihood of their draft being adopted.
The arbitrator will ordinarily communicate to the parties which draft has been adopted the following morning, by way of final award. The arbitrator does not give reasons.
The overall time and cost is likely to be similar to a typical mediation.
How does the arbitrator choose between the drafts?
Unless otherwise agreed, the arbitrator chooses the draft that is adjudged to most closely match the likely outcome of the case, if it went to court, in light of the facts and the law.
Do the parties have to be legally represented?
No, although they usually are.
Can the parties talk to the pendulum arbitrator in private?
No. Like more conventional arbitration all communications about the case with the pendulum arbitrator must be shared with the other party. Such openness is a vital ingredient of the process.
Can the parties agree to a pendulum arbitration if court proceedings are in progress?
Yes. Pendulum arbitration may be particularly appropriate if the parties see that the legal cost of continued litigation would outstrip the amount genuinely in dispute. In these circumstances, the pendulum arbitration takes the place of that continued litigation.
Can the parties agree to a pendulum arbitration following a failed mediation?
Yes. Again, pendulum arbitration may be particularly appropriate in these circumstances. If the parties have been able to narrow but not close the gap between them, they may agree that the draft awards must be in that range.
Can the parties agree to settle during a pendulum arbitration?
Is the process final?
Yes, like any other arbitration award, a pendulum arbitration award may be registered for enforceability in the court. There is little or no opportunity for appeal.
How can the parties agree to a pendulum arbitration?
The parties enter into a written pendulum arbitration agreement. A model form of agreement is available at feconslaw.com/pendulum-arbitration-2/model-pendulum-arbitration-agreement/.
Who is the pendulum arbitrator?
Robert Fenwick Elliott, a lawyer who has very considerable experience in the construction law field, offers a pendulum arbitration service. Alternatively, the parties are free to choose any other person in whom they both have confidence.
Has the process of pendulum arbitration ever been challenged in the Australian courts?
Yes. It was challenged in NSW Racing v Tab  NSWSC 742. The Supreme Court of New South Wales found that there was no reason why the parties should not be held to the pendulum arbitration agreement (the judge referred to it as “last best offer” or “baseball”) that they had agreed.
What has been the verdict of practitioners in South Australia?
The procedure has attracted very positive comment from practitioners with experience of it: “deserves to be deployed more frequently in SA”, “interesting and effective”, “very positive”.
Is pendulum arbitration suitable for all types of case?
No. It is not suitable if the parties are looking for some sort of injunctive relief, or believe that cross-examination of witnesses is necessary for justice to be done. It is particularly suitable for commercial cases, including building disputes, where the essential question is how much one party should pay to the other for the cost of the work and/or defective work or delay.
The procedure is unlikely to be suitable for disputes between more than 2 parties.
Further information about the pendulum arbitration process is available at feconslaw.com/pendulum-arbitration/.
This handout has been produced by Robert Fenwick Elliott who may be contacted by email at Robert@feconslaw.com.