仲裁现实：EB-5 投资者须知

Many investors who wish to litigate against an issuer or other party protected by the offering document’s legal clauses will have to go through arbitration for resolution of their dispute. This is because most PPMs require investors to sign mandatory arbitration clauses which require investors to arbitrate cases with their issuer before going to court.

Arbitration is a pre-trial procedure used as an alternative to dispute resolution in a court of law. Usually, arbitration is used to find mutually-agreed upon points of settlement between both parties prior to trial. 

Even though courts exist to provide an impartial forum for legal disputes and resolution, arbitration must be conducted in a “forum”, typically pre-designated in the project’s offering documents. Usually this “forum” is the American Arbitration Association (AAA) or Mediation, Arbitration, and ADR Services (JAMS). In this case, one or three private judges from the forum will be chosen by the parties to resolve the matter.

In theory, arbitration has many advantages over litigation. Efficiency is perhaps the greatest. Proponents say arbitration is easier and faster, given that settlement areas can be identified faster. Proponents also point to the greater flexibility afforded to parties in arbitration, who can set the terms and rules of the process with their counsel. 

Arbitration is also typically cheaper than litigation (the in-court trial), yet has the same binding power as court decisions stemming from litigation. However, EB-5 investors may find investment issuers intentionally setting high fees for arbitration in order to detract any investors from pursuing litigation with a mandatory and expensive arbitration period. Depending on the degree of wrongdoing and harm inflicted on the plaintiff, investment issuers will use the fear of further financial fallout and cost to prevent disgruntled investors from seeking help. The forums chosen for arbitration by the issuer will also charge steep, flat filing fees, oftentimes multiples of what an average court would charge for litigation. Additionally, forums will charge for further expenditures throughout the course of arbitration. An experienced litigator will be able to evaluate an arbitration clause in your documents to determine whether it is binding or whether you may be able to file in court.