Drafting Dispute Resolution Clauses€¦ · drafting or adopting any dispute resolution clause, no matter how basic. The second section describes the major features of arbitration,

www.adr.org

Drafting Dispute Resolution Clauses

A p r A c t i c A l G u i d e

Amended and effective September 1, 2007

This booklet is intended to assist parties in drafting alternative dispute resolution (ADR) clauses. With that in mind, and in addition to the suggested clauses, the committee compiled a checklist of considerations for the drafter, as well as examples of supplemental language which go beyond the basic clauses. Users will benefit from the commentary throughout the text which helps to identify points of interest. Parties with questions regarding drafting an AAA clause should contact their local AAA office. Offices are listed on the AAA’s website, www.adr.org.

Table of Contents

Introduction 3

I. AChecklistfortheDrafter 4

II. MajorFeaturesofArbitration 5

AWrittenAgreementtoResolveDisputes bytheUseofImpartialArbitration 5

InformalProcedures 6

ImpartialandKnowledgeableNeutrals toServeasArbitrators 6

FinalandBindingAwards thatareEnforceableinaCourt 6

III. ClausesApprovedbytheAAA forGeneralCommercialUse 7

Arbitration 7

Negotiation 10

Mediation 11

Large,ComplexCases 11

IV. ClausesforUseinSpecificContexts 13

A. ClausesforUseinInternationalDisputes 13

B. ClausesforUseinConstructionDisputes 16

C. ClausesforUseinEmploymentDisputes 18

D. ClausesforUseinPatentDisputes 20

V. OtherProvisionsThatMightBeConsidered 22

A. SpecifyingaMethodofSelection andtheNumberofArbitrators 23

B. ArbitratorQualifications 25

C. LocaleProvisions 26

D. Language 26

E. GoverningLaw 27

F. ConditionsPrecedenttoArbitration 27

G. PreliminaryRelief 28

H.Consolidation 29

I. DocumentDiscovery 30

J. Depositions 31

K. DurationofArbitrationProceeding 32

L. Remedies 32

M.“Baseball”Arbitration 33

N. ArbitrationWithinMonetaryLimits 34

O. AssessmentofAttorneys’Fees 35

P. ReasonedOpinion AccompanyingtheAward 36

Q. Confidentiality 36

R. Appeal 37

S. Mediation-Arbitration 38

T. StatuteofLimitations 38

U. DisputeResolutionBoards 39

V. MassTorts 39

Conclusion 40

Introduction

Everyyear,millionsofbusinesscontractsprovideformediationandarbitrationaswaysofresolvingdisputes.AlargenumberofthesecontractsprovideforadministrationbytheAmericanArbitrationAssociation(AAA),apublic-service,not-for-profitorganizationofferingabroadrangeofconflictmanagementprocedures.AAAservicesareavailablethroughofficeslocatedinmajorcitiesthroughouttheUnitedStatesandDublin,Ireland,aswellasthrougharrangementswithotherinstitutionsworldwide.Hearingsmaybeheldatlocationsconvenientfortheparties.Inaddition,theAAAprovideseducationandtraining,producesspecializedpublicationsandconductsresearchonout-of-courtdisputesettlement.

Typically,theparties’agreementtomediateorarbitrateiscontainedinafuture-disputesclauseintheircontract;theclausemayprovidethatanydisagreementwillberesolvedunderthemediationorarbitra-tionrulesoftheAmericanArbitrationAssociation.

TheAmericanArbitrationAssociationisknownforthehighqualityofitspanelsofmediatorsandarbitrators,includingaLarge,ComplexCasePanel.AspecialAAAinternationalcenter,theInternationalCentreforDisputeResolutionSM,administerscasesaroundtheglobeandanywhereintheU.S.

Thefirstsectionofthisbookletcontainsabriefchecklistofsomeofthemoreimportantelementsapractitionershouldkeepinmindwhendraftingoradoptinganydisputeresolutionclause,nomatterhowbasic.Thesecondsectiondescribesthemajorfeaturesofarbitration,andthethirdsectionprovidesaseriesofclausesthattheAAAfeelsareappropriateforuseinageneralcommercialsettingandwhichmeetdifferentneedsandconcernsinsuchacontext.ThefourthsectioncontainsaseriesofclausesthattheAAAdeemsappropriateforuseintheparticularcontextsofinternationaldisputes,constructiondisputes,employmentdisputes,andpatentdisputes.ThefinalsectionconsistsofexamplesofsupplementallanguagewhichgobeyondthebasicdisputeresolutionclausesinSectionsIIIandIV.WhiletheAAA

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Drafting Dispute Resolution Clauses – A Practical Guide

doesnotnecessarilyrecommendsuchexpandedprovisions,itrecog-nizesthatsuchadditionsareusedfromtimetotimetomeetspecificwishesorneedsoftheparties.Explanatorytextsetsforthfactorsonemighttakeintoaccountwhenconsideringwhethertoincludesuchsupplementallanguage.

I. A Checklist for the Drafter

Itisnotenoughtostatethat“disputesarisingundertheagreementshallbesettledbyarbitration.”Whilethatlanguageindicatestheparties’intentiontoarbitrateandmayauthorizeacourttoenforcetheclause,itleavesmanyissuesunresolved.Issuessuchaswhen,where,howandbeforewhomadisputewillbearbitratedaresubjecttodisagreementonceacontroversyhasarisen,withnowaytoresolvethemexcepttogotocourt.

Someofthemoreimportantelementsapractitionershouldkeepinmindwhendrafting,adoptingorrecommendingadisputeresolutionclausefollow.

> Theclausemightcoveralldisputesthatmayarise,oronlycertaintypes.

> Itcouldspecifyonlyarbitration–whichyieldsabindingdecision–oralsoprovideanopportunityfornon-bindingnegotiationormediation.

> Thearbitrationclauseshouldbesignedbyasmanypotentialpartiestoafuturedisputeaspossible.

> Tobefullyeffective,“entryofjudgment”languageindomesticcasesisimportant.

> Itisnormallyagoodideatostatewhetherapanelofoneorthreearbitrator(s)istobeselected,andtoincludetheplacewherethearbitrationwilloccur.

> Ifthecontractincludesageneralchoiceoflawclause,itmaygovernthearbitrationproceeding.Theconsequencesshouldbeconsidered.


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> ConsiderationshouldbegiventoincorporatingtheAAA’sProceduresforLarge,ComplexCommercialDisputesforpotentiallysubstantialorcomplicatedcases.

> ThedraftershouldkeepinmindthattheAAAhasspecializedrulesforarbitrationintheconstruction,patent,securitiesandcertainotherfields.Ifanticipateddisputesfallintoanyoftheseareas,thespecializedrulesshouldbeconsideredforincorporationinthearbitrationclause.AnexperiencedAAAadministrativestaffmanagestheprocessingofcasesunderAAArules.

> Thepartiesarefreetocustomizeandrefinethebasicarbitrationprocedurestomeettheirparticularneeds.IfthepartiesagreeonaprocedurethatconflictswithotherwiseapplicableAAArules,theAAAwillalmostalwaysrespectthewishesoftheparties.

II. Major Features of Arbitration

Arbitrationisaprivate,informalprocessbywhichallpartiesagree,inwriting,tosubmittheirdisputestooneormoreimpartialpersonsauthorizedtoresolvethecontroversybyrenderingafinalandbindingaward.Itisusedforawidevarietyofdisputes–fromcommercialdisagreementsinvolvingconstruction,securitiestransactions,computersorrealestate(tonamejustafew),toinsuranceclaimsandlabor-uniongrievances.Whenanagreementtoarbitrateisincludedinacontract,itmightexpeditepeacefulsettlementwithoutthenecessityofgoingtoarbitrationatall.Thus,anarbitrationclauseisaformofinsuranceagainstlossofgoodwill.

Themajorfeaturesofarbitrationare:

1. AWrittenAgreementtoResolveDisputesbytheUseofImpartialArbitration.Suchaprovisionmaybeinsertedinacontractforresolutionoffuturedisputesormaybeanagreementtosubmittoarbitrationanexistingdispute.

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2. InformalProcedures.UndertheAAArules,theprocedureisrelativelysimple:courtroomrulesofevidencearenotstrictlyapplicable;thereusuallyisnomotionpracticeorformaldiscovery;andthereisnorequirementfortranscriptsoftheproceedingsorforwrittenopinionsofthearbitrators.Thoughtheremaybenoformaldiscovery,theAAA’svariouscommercialrulesallowthearbitratortorequireproductionofrelevantinformationanddocuments.TheAAA’srulesareflexibleandmaybevariedbymutualagreementoftheparties.

3. ImpartialandKnowledgeableNeutralstoServeasArbitrators.Arbitratorsareselectedforspecificcasesbecauseoftheirknowledgeofthesubjectmatter.Basedonthatexperience,arbitratorscanrenderanawardgroundedonthoughtfulandinformedanalysis.

4. FinalandBindingAwardsthatareEnforceableinaCourt.Courtinterventionandreviewislimitedbyapplicablestateorfederalarbitrationlawsandawardenforcementisfacilitatedbythosesamelaws.

Duringitsmanyyearsofexistence,theAAAhasrefineditsstandardarbitrationclause.Thatclause,whenlinkedtoAAAcasemanagement,offersthepartiesasimple,time-testedmeansofresolvingdisputes.Occasionally,partiesortheircounseldesireadditionalprovisions.Thisbooklethasbeenpreparedasageneralguidefordraftingdisputeresolutionclauses.ItcontainsexamplesofclausesandportionsofclausesthathavebeenusedbypartiesincasesfiledwiththeAAA.ReadersshouldfeelfreetocontacttheirlocalAAAofficeforfurtherinformation.


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III. Clauses Approved By the AAA for General Commercial Use

ThestandardarbitrationclausesuggestedbytheAmericanArbitrationAssociationaddressesmanybasicdraftingquestionsbyincorporatingAAArules.Thissimpleapproachhasprovenhighlyeffectiveinhundredsofthousandsofdisputes.Additionallanguage,whichpartiesmaywishtoaddinspecificcontexts,isdiscussedinSectionIVofthisbooklet.

ThestandardarbitrationclausealsomayincludereferencetotheAAA’sOptionalRulesforEmergencyMeasuresofProtection(beforeanarbitratorisselected)andforexpeditedarbitration.

Ifthepartieswish,standardclausesalsomaybeusedfornegotiationandmediation.Therearealsostandardclausesforuseinlarge,complexcases.

Arbitration

Thepartiescanprovideforarbitrationoffuturedisputesbyinsertingthefollowingclauseintotheircontracts(thelanguageinthebracketssuggestspossiblealternativesoradditions).

STD1 Anycontroversyorclaimarisingoutoforrelatingtothiscontract,orthebreachthereof,shallbesettledbyarbitrationadministeredbytheAmericanArbitrationAssociationinaccordancewithitsCommercial[orother]ArbitrationRules[includingtheOptionalRulesforEmergencyMeasuresofProtection],andjudgmentontheawardrenderedbythearbitrator(s)maybeenteredinanycourthavingjurisdictionthereof.

Arbitrationofexistingdisputesmaybeaccomplishedbyuseofthefollowing.

STD2 We,theundersignedparties,herebyagreetosubmittoarbitrationadministeredbytheAmericanArbitrationAssociationunderitsCommercial[orother]ArbitrationRulesthefollowingcontroversy:[describebriefly].Wefurtheragreethatajudgmentofanycourthavingjurisdictionmaybeenteredupontheaward.

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Theprecedingclauses,whichrefertothetime-testedrulesoftheAAA,haveconsistentlyreceivedjudicialsupport.Thestandardclauseisoftenthebesttoincludeinacontract.ByinvokingtheAAA’srules,suchaclausemeetsthefollowingrequirementsofaneffectivearbitrationclause:

> Itmakesclearthatalldisputesarearbitrable.Thus,itminimizesdilatorycourtactionstoavoidthearbitrationprocess.

> Itisself-enforcing.Arbitrationcancontinuedespiteanobjectionfromaparty,unlesstheproceedingsarestayedbycourtorderorbyagreementoftheparties.

> Itprovidesacompletesetofrulesandprocedures.Thiseliminatestheneedtospelloutdozensofproceduralmattersintheparties’agreement.

> Itprovidesfortheselectionofaspecialized,impartialpanel.Arbitratorsareselectedbythepartiesfromascreenedandtrainedpoolofavailableexperts.UndertheAAArules,aprocedureisavailabletodisqualifyanarbitratorforbias.

> Itsettlesdisputesoverthelocaleofproceedings.Whenthepar-tiesdisagree,localedeterminationsaremadebytheAAAastheadministrator,precludingtheneedforinterventionbyacourt.

> Itmakespossibleadministrativeconferences.IftheclauseincorporatestheAAAcommercial,constructionindustryorrelat-edarbitrationrules,anadministrativeconferencewiththeparties’representativesandAAAcasemanagementtoexpeditethearbitrationproceedingsisavailablewhenappropriate.

> Itmakesavailablepreliminaryhearings.IftheclauseprovidesforAAArules,apreliminaryhearingcanbearrangedincommercialcasesofanysizetospecifytheissuestoberesolved,clarifyclaimsandcounterclaims,provideforapre-hearingexchangeofinformation,andconsiderothermattersthatwillexpeditethearbitrationproceedings.

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> Italsomakesmediationavailable.IftheclauseprovidesforanyoftheAAA’svariouscommercialarbitrationrules,mediationconferencescanbearrangedtofacilitateavoluntarysettlement,withoutadditionaladministrativecosttotheparties.

> Itestablishestimelimitstoensurepromptresolutionforalldis-putes.AnadditionalfeatureofthevariousAAArulesisaspecialexpeditedprocedure,whichmaybeusedtoresolvesmallerclaimsandotherdisputesthatneedmorespeedyresolutions.

> ItprovidesforAAAadministrativeassistancetothearbitratorandtheparties.Toprotectneutralityandavoidunilateralcon-tact,mostrulesprovidefortheAAAtochannelcommunicationsbetweenthepartiesandthearbitrator.AnAAAcasemanagermayalsoprovideguidancetohelpensurepromptconclusionofapro-ceeding.

> Itestablishesaprocedureforservingnotices.Dependingontherulesusedandthetypeofthecase,noticesmaybeservedbyregularmail,addressedtothepartyoritsrepresentativeatthelastknownaddress.Undertherules,theAAAandthepartiesmayusefacsimiletransmissionorotherwrittenformsofelectroniccommunicationtogivethenoticesrequiredbytherules.

> Unlessotherwiseprovided,itgivesthearbitratorthepowertodecidemattersequitablyandtofashionappropriaterelief.TheAAAcommercialrulesallowthearbitratortograntanyremedyorreliefthatthearbitratordeemsjustandequitableandwithinthescopeoftheagreementoftheparties,includingspecificperformance.

> Itallowsexpartehearings.Ahearingmaybeheldintheabsenceofapartywhohasbeengivenduenotice.Thus,apartycannotavoidanawardbyrefusingtoappear.

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> Itprovidesforenforcementoftheaward.Theawardcanbeenforcedinanycourthavingjurisdiction,withonlylimitedstatu-torygroundsforresistingtheaward.If,inadomestictransaction,asdistinguishedfromaninternationalone,thepartiesdesirethatthearbitrationclausebefinal,bindingandenforceable,itisessentialthattheclausecontainan“entryofjudgment”provisionsuchasthatfoundinthestandardarbitrationclause(“andjudgmentontheawardrenderedbythearbitratormaybeenteredinanycourthavingjurisdictionthereof”).

Negotiation

Thepartiesmaywishtoattempttoresolvetheirdisputesthroughnegotiationpriortoarbitration.Asampleofaclausewhichprovidesfornegotiationfollows.

NEG1 Intheeventofanydispute,claim,question,ordisagreementarisingfromorrelatingtothisagreementorthebreachthereof,thepartiesheretoshallusetheirbesteffortstosettlethedispute,claim,question,ordisagreement.Tothiseffect,theyshallconsultandnegotiatewitheachotheringoodfaithand,recognizingtheirmutualinterests,attempttoreachajustandequitablesolutionsatisfactorytobothparties.Iftheydonotreachsuchsolutionwithinaperiodof60days,then,uponnoticebyeitherpartytotheother,alldisputes,claims,questions,ordifferencesshallbefinallysettledbyarbitrationadministeredbytheAmericanArbitrationAssociationinaccordancewiththeprovisionsofitsCommercialArbitrationRules.


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Mediation

Thepartiesmaywishtoattemptmediationbeforesubmittingtheirdisputetoarbitration.Thiscanbeaccomplishedbymakingreferencetomediation(whichmaybeterminatedatanytimebyeitherparty)inthearbitrationclause.

MED1 Ifadisputearisesoutoforrelatestothiscontract,orthebreachthereof,andifthedisputecannotbesettledthroughnegotiation,thepartiesagreefirsttotryingoodfaithtosettlethedisputebymediationadministeredbytheAmericanArbitrationAssociationunderitsCommercialMediationProceduresbeforeresortingtoarbitration,litigation,orsomeotherdisputeresolutionprocedure.

MED2 Thepartiesherebysubmitthefollowingdisputetomedia-tionadministeredbytheAmericanArbitrationAssociationunderitsCommercialMediationProcedures[theclausemayalsoprovideforthequalificationsofthemediator(s),themethodforallocatingfeesandexpenses,thelocaleofmeetings,timelimits,oranyotheritemofconcerntotheparties].

AnAAAadministratorcanassistthepartiesregardingselectionofthemediator,scheduling,pre-mediationinformationexchangeandattendanceofappropriatepartiesatthemediationconference.

Itisprudenttoincludetimelimitsonstepspriortoarbitration.Underabroadarbitrationclause,thequestionofwhetheraclaimhasbeenassertedwithinanapplicabletimelimitisgenerallyregardedasanarbitrableissue,suitableforresolutionbythearbitrator.

Large,ComplexCases

Thelarge,complexcaseframeworkofferedbytheAAAisdesignedprimarilyforbusinessdisputesinvolvingclaimsofatleast$500,000,althoughpartiesarefreetoprovideforuseoftheLCCRulesinotherdisputes.Thekeyelementsoftheprogramare(1)selectionofarbitratorswhosatisfyrigorouscriteriatoinsurethatthepanelisanextremelyselectone;(2)training,orientation,andcoordination

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ofthosearbitratorsinamannerdesignedtofacilitatetheprogram;(3)establishmentofproceduresforadministrationofthosecasesthatelecttobeincludedintheprogram;(4)flexibilityofthoseproceduressothatpartiescanmorespeedilyandefficientlyresolvetheirdisputes;and(5)administrationoflarge,complexcasesbyspeciallytrained,experiencedAAAstaff.

TheproceduresprovideforanearlyadministrativeconferencewiththeAAA,andapreliminaryhearingwiththearbitrators.Documentaryexchangesandotheressentialexchangesofinformationarefacilitated.Theproceduresalsoprovidethatastatementofreasonsmayaccom-panytheaward,ifrequestedbytheparties.Theproceduresaremeanttosupplementtheapplicablerulesthatthepartieshaveagreedtouse.Theyincludethepossibilityoftheuseofmediationtoresolvesomeorallissuesatanearlystage.

Thepartiescanprovideforfutureapplicationoftheproceduresbyincludingthefollowingarbitrationclauseintheircontract.

LCCP1 AnycontroversyorclaimarisingfromorrelatingtothiscontractorthebreachthereofshallbesettledbyarbitrationadministeredbytheAmericanArbitrationAssociationunderits[applicable]ProceduresforLarge,ComplexCommercialDisputes,andjudgmentontheawardrenderedbythearbitrator(s)maybeenteredinanycourthavingjurisdictionthereof.

ApendingdisputecanbereferredtotheprogrambythecompletionofaSubmissiontoDisputeResolutionformiftheunderlyingcontractdocumentsdonotprovideforAAAadministration.

LCCP2 We,theundersignedparties,herebyagreetosubmittoarbitrationadministeredbytheAmericanArbitrationAssociationunderits[applicable]ProceduresforLarge,ComplexCommercialDisputesthefollowingcontroversy[describebriefly].Judgmentofanycourthavingjurisdictionmaybeenteredontheaward.


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IV. Clauses for Use in Specific Contexts

Thefollowingclauses,whichalsocanprovideforperiodsofnegotia-tionand/ormediationpriortoarbitration,maybeconsideredforuseinspecificcontexts.ThechecklistofconsiderationsinSectionIabovealsoshouldbeconsulted.

A.ClausesforUseinInternationalDisputes

TheInternationalCentreforDisputeResolution(ICDR),theinternationaldivisionoftheAmericanArbitrationAssociation,administersinternationalcommercialcasesundervariousarbitra-tionrulesworldwide.TheICDRadministerscasesunderitsownInternationalDisputeResolutionProcedures,variousAAArules,theCommercialArbitrationandMediationCenterfortheAmericas(CAMCA)Rules,theRulesoftheInter-AmericanCommercialArbitrationCommission(IACAC)andtheUNCITRALArbitrationRules.UnderArticle1oftheInternationalArbitrationRules,partiesmaydesignateeithertheICDRortheAAAinthearbitrationclauseforthepurposesofnaminganadministrativeagencyandconferringproperjurisdictiontotheICDRortheAAA.Followingaresamplesofarbitrationclausespertinenttointernationaldisputes.

INTL1 Anycontroversyorclaimarisingoutoforrelatingtothiscontractshallbedeterminedbyarbitrationinaccor-dancewiththeInternationalArbitrationRulesoftheInternationalCentreforDisputeResolution.

INTL2 Anydispute,controversy,orclaimarisingoutoforrelatingtothiscontract,orthebreachthereof,shallbefinallysettledbyarbitrationadministeredbytheCommercialArbitrationandMediationCenterfortheAmericasinaccordancewithitsrules,andjudgmentontheawardrenderedbythearbitrator(s)maybeenteredinanycourthavingjurisdictionthereof.

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INTL3 Anydispute,controversy,orclaimarisingfromorrelatingtothiscontract,orthebreach,termination,orinvaliditythereof,shallbesettledbyarbitrationinaccordancewiththeRulesofProcedureoftheInter-AmericanCommercialArbitrationCommissionineffectonthedateofthisagreement.

INTL4 Anydispute,controversy,orclaimarisingoutoforrelatingtothiscontract,orthebreach,termination,orinvaliditythereof,shallbesettledbyarbitrationundertheUNCITRALArbitrationRulesineffectonthedateofthiscontract.TheappointingauthorityshallbetheInternationalCentreforDisputeResolution.ThecaseshallbeadministeredbytheInternationalCentreforDisputeResolutionunderitsProceduresforCasesundertheUNCITRALArbitrationRules.

Thepartiesshouldconsideraddingarequirementregardingthenumberofarbitratorsappointedtothedisputeanddesignatingtheplaceandlanguageofthearbitration.ThepartiesmayalsosubmitaninternationaldisputeundertheAAA’scommercialandotherspecializedarbitrationrules.Thoseproceduresdonotsupersedeanyprovisionoftheapplicablerulesbutmerelycodifyvariousprocedurescustomarilyusedininternationalarbitration.Includedamongthemareprovisionsspecifyingtheneutralityofarbitrators,consecutivehearingdays,thelanguageofhearings,andopinions.Thethrustoftheproceduresistoexpediteinternationalproceedingsandkeepthemaseconomicalaspossible.

Forstrategicorlongtermcommercialcontracts,thepartiesmaywishtoprovidea“step”disputeresolutionprocessencouragingnegotiatedsolutions,ormediationinadvanceofarbitrationorlitigation.Amodelstepclauseandmediationclausefollow.


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INTL5 Intheeventofanycontroversyorclaimarisingoutoforrelatingtothiscontract,thepartiesheretoshallconsultandnegotiatewitheachotherand,recognizingtheirmutualinterests,attempttoreachasolutionsatisfactorytobothparties.Iftheydonotreachsettlementwithinaperiodof60days,theneitherpartymay,bynoticetotheotherpartyandtheInternationalCentreforDisputeResolution,demandmediationundertheInternationalMediationProceduresoftheInternationalCentreforDisputeResolution.Ifsettlementisnotreachedwithin60daysafterserviceofawrittendemandformediation,anyunresolvedcontroversyorclaimarisingoutoforrelatingtothiscon-tractshallbesettledbyarbitrationinaccordancewiththeInternationalArbitrationRulesoftheInternationalCentreforDisputeResolution.

INTL6 Intheeventofanycontroversyorclaimarisingoutoforrelatingtothiscontract,thepartiesheretoagreefirsttotryandsettlethedisputebymediationadministeredbytheInternationalCentreforDisputeResolutionunderitsrulesbeforeresortingtoarbitration,litigation,orsomeotherdisputeresolutiontechnique.

Usually,theeffectivemanagementoftimeandexpenseinarbitrationisbestleftinthehandsofexperiencedcasemanagersandarbitrators.Occasionally,however,partieswishtoensurethatmattersareresolvedinaminimumoftimeandwithoutrecoursetotheexpenseandtimenecessitatedbycommonlawmethodsofpre-hearinginformationexchange.Theclausesthatfollowlimitthetimeframeofarbitration(clausespresentedinthealternative)andtheamountofpre-hearinginformationexchangeavailabletotheparties.Onewordofcaution:onceenteredinto,theseclauseswilllimitthearbitrator’sauthoritytomoldtheprocesstothespecificdictatesofthecase.

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INTL7 Theawardshallberenderedwithinninemonthsofthecommencementofthearbitration,unlesssuchtimelimitisextendedbythearbitrator.

Alternative

ItistheintentofthePartiesthat,barringextraordinarycircumstances,arbitrationproceedingswillbeconcludedwithin60daysfromthedatethearbitrator(s)areappointed.Thearbitraltribunalmayextendthistimelimitintheinterestsofjustice.Failuretoadheretothistimelimitshallnotconstituteabasisforchallengingtheaward.

INTL8 Consistentwiththeexpeditednatureofarbitration,pre-hearinginformationexchangeshallbelimitedtothereasonableproductionofrelevant,non-privilegeddocuments,carriedoutexpeditiously.

Enforcementofinternationalawardsisfacilitatedbythe1958UNConventionontheRecognitionandEnforcementofForeignArbitralAwards(the“NewYorkConvention”),whichhasbeenratifiedbymorethan110nations,andfacilitatedinthishemispherebytheInter-AmericanConventiononInternationalCommercialArbitration(the“PanamaConvention”).

B.ClausesforUseinConstructionDisputes

TheAAAConstructionIndustryArbitrationRulesandMediationProceduresaredesignedtoexpeditethedisputeresolutionprocessandhelptheAAAbemoreresponsivetotheneedsoftheconstructionindustry.Therulescontaina“fasttrack”arbitrationsystemforcasesinvolvingclaimsoflessthan$75,000;enhancementstothe“regulartrack”rules;andaLarge,ComplexConstructioncasetrackforuseincasesinvolvingclaimsofatleast$500,000.


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Thepartiescanprovideforarbitrationoffuturedisputesbyinsertingthefollowingclauseintotheircontracts.

CONST1 Anycontroversyorclaimarisingoutoforrelatingtothiscontract,orthebreachthereof,shallbesettledbyarbitra-tionadministeredbytheAmericanArbitrationAssociationunderitsConstructionIndustryArbitrationRules,andjudgmentontheawardrenderedbythearbitrator(s)maybeenteredinanycourthavingjurisdictionthereof.

CONST2 We,theundersignedparties,herebyagreetosubmittoarbitrationadministeredbytheAmericanArbitrationAssociationunderitsConstructionIndustryArbitrationRulesthefollowingcontroversy:(citebriefly).Wefurtheragreethatthecontroversybesubmittedto(one)(three)arbitrator(s).Wefurtheragreethatwewillfaithfullyobservethisagreementandtherules,andthatajudgmentofanycourthavingjurisdictionmaybeenteredontheaward.

Ifpartieswishtoadoptmediationaspartoftheircontractualdisputesettlementprocedure,theycaninsertthefollowingmediationclauseinconjunctionwithastandardarbitrationprovision,andmayalsoprovidethattherequirementoffilinganoticeofclaimwithrespecttothedisputesubmittedtomediationshallbesuspendeduntiltheconclusionofthemediationprocess.

CONST3 Ifadisputearisesoutoforrelatestothiscontract,orthebreachthereof,andifthedisputecannotbesettledthroughnegotiation,thepartiesagreefirsttotryingoodfaithtosettlethedisputebymediationadministeredbytheAmericanArbitrationAssociationunderitsConstructionIndustryMediationProceduresbeforeresortingtoarbitra-tion,litigation,orsomeotherdisputeresolutiontechnique.

Partiesalsohavetheoptionofinsertinga“step”mediation-arbitrationclauseintotheircontracts.Adisputeresolutionhybrid,theclauseprovidesfirstformediationandthen,ifthedisputeisnotresolvedwithinaspecifiedtimeframe,arbitration.

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CONST4 Anycontroversyorclaimarisingoutoforrelatingtothiscontractorbreachthereof,shallbesettledbymediationundertheConstructionIndustryMediationProceduresoftheAmericanArbitrationAssociation.Ifwithin30daysafterserviceofawrittendemandformediation,themediationdoesnotresultinsettlementofthedispute,thenanyunresolvedcontroversyorclaimarisingfromorrelatingtothiscontractorbreachthereofshallbesettledbyarbitrationadministeredbytheAmericanArbitrationAssociationinaccordancewithitsConstructionIndustryArbitrationRulesandjudgmentontheawardrenderedbythearbitrator(s)maybeenteredinanycourthavingjurisdictionthereof.

Ifthepartieswanttouseamediatortoresolveanexistingdispute,theycanenterintothefollowingsubmission.

CONST5 Thepartiesherebysubmitthefollowingdisputetomedia-tionadministeredbytheAmericanArbitrationAssociationunderitsConstructionIndustryMediationProcedures(theclausemayalsoprovideforthequalificationsofthemediator(s),methodofpayment,localeofmeetings,thetollingofthestatuteoflimitations,pre-arbitrationstepclausewithtimeframesandanyotheritemofconcerntotheparties).

C.ClausesforUseinEmploymentDisputes

Conflictswhichariseduringthecourseofemployment,suchaswrong-fultermination,sexualharassmentanddiscriminationbasedonrace,color,religion,sex,nationalorigin,ageanddisability,haveredefinedresponsiblecorporatepracticeandemployeerelations.TheAAAthereforehasdevelopedspecialrulescalledtheNationalRulesfortheResolutionofEmploymentDisputes.TheAAA’spolicyonemploy-mentADRisguidedbythestateofexistinglaw,aswellasitsobligationtoactinanimpartialmanner.Infollowingthelaw,andintheinterestof


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providinganappropriateforumfortheresolutionofemploymentdisputes,theAssociationadministersdisputeresolutionprogramswhichmeetthedueprocessstandardsasoutlinedinitsNationalRulesfortheResolutionofEmploymentDisputesandtheDueProcessProtocolforMediationandArbitrationofStatutoryDisputesArisingoutoftheEmploymentRelationship.IftheAssociationdeterminesthatadisputeresolutionprogramonitsfacesubstantiallyandmateriallydeviatesfromtheminimumdueprocessstandardsoftheNationalRulesfortheResolutionofEmploymentDisputesandtheprotocol,theAssociationwilldeclinetoadministercasesunderthatprogram.Otherissueswillbepresentedtothearbitratorfordetermination.

AnemployerintendingtoincorporatetheserulesortorefertothedisputeresolutionservicesoftheAAAinanemploymentADRplan,shall,atleast30dayspriortotheplannedeffectivedateoftheprogram,(1)notifyand(2)providetheAssociationwithacopyoftheemploymentdisputeresolutionplan.Ifanemployerdoesnotcomplywiththisrequirement,theAssociationreservestherighttodeclineitsadministrativeservices.

Partiescanprovideforarbitrationoffuturedisputesbyinsertingthefollowingclauseintotheiremploymentcontracts,personnelmanualsorpolicystatements,employmentapplications,orotheragreements.

EMPL1 Anycontroversyorclaimarisingoutoforrelatingtothis[employmentapplication;employmentADRprogram;employmentcontract]shallbesettledbyarbitrationadministeredbytheAmericanArbitrationAssociationunderitsNationalRulesfortheResolutionofEmploymentDisputesandjudgmentupontheawardrenderedbythearbitrator(s)maybeenteredinanycourthavingjurisdictionthereof.

Arbitrationofexistingdisputescanbeaccomplishedbyuseofthefollowingclause.

EMPL2 We,theundersignedparties,herebyagreetosubmittoarbitration,administeredbytheAmericanArbitration

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AssociationunderitsNationalRulesfortheResolutionofEmploymentDisputes,thefollowingcontroversy:(describebriefly).Wefurtheragreethattheabovecontroversybesubmittedto(one)(three)arbitrator(s)selectedfromtherosterofarbitratorsoftheAmericanArbitrationAssociation,andthatajudgmentofanycourthavingjurisdictionmaybeenteredontheaward.

Partiesmayagreetousemediationonaninformalbasisforselecteddisputes,ormediationmaybedesignatedinapersonnelmanualasasteppriortoarbitration,litigationorsomeotherdisputeresolutiontechnique.Ifthepartieswanttoadoptmediationasapartoftheircontractualdispute-settlementprocedure,theycanaddthefollowingmediationclausetotheircontract.

EMPL3 Ifadisputearisesoutoforrelatestothis[employmentapplication;employmentADRprogram;employmentcontract]orthebreachthereof,andifthedisputecannotbesettledthroughnegotiation,thepartiesagreefirsttotryingoodfaithtosettlethedisputebymediationadministeredbytheAmericanArbitrationAssociationunderitsNationalRulesfortheResolutionofEmploymentDisputes,beforeresortingtoarbitration,litigationorsomeotherdisputeresolutionprocedure.


EMPL4 Thepartiesherebysubmitthefollowingdisputetomedia-tionadministeredbytheAmericanArbitrationAssociationunderitsNationalRulesfortheResolutionofEmploymentDisputes(theclausemayalsoprovideforthequalificationsofthemediator(s),methodofpayment,localeofmeetings,andanyotheritemofconcerntotheparties).

D.ClausesforUseinPatentDisputes

Thesuitabilityofarbitrationasapromptandeffectivemeansofresolving


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intellectualpropertydisputeshasbeenwellrecognizedinrecentyears.Thosewhouseandsupportarbitrationasawayofresolvingintellectualpropertyandlicensingdisputeshaveacknowledgedthefollowingadvantagesofarbitrationoverlitigationinthistechnicalfield:relativespeedandeconomy,privacy,convenience,informality,reducedlikelihoodofdamagetoongoingbusinessrelationships,greatersuitabilitytointernationalproblems,and,especiallyimportant,theabilityofthepartiestoselectarbitratorswhoareexpertsandfamiliarwiththesubjectmatterofthedispute.

Theawardisbindingonlyonthepartiestothearbitration,andthepartiesmayagreethattheawardwillbemodifiedifthepatentthatisthesubjectofthearbitrationissubsequentlydeterminedtobeinvalidorunenforceable.Ifpartiesforeseethepossibilityofneedingemergencyreliefakintoatemporaryrestrainingorder,theymightspecifyanarbitratorbynameforthatpurposeintheirarbitrationclauseorauthorizetheAAAtonameapreliminaryreliefarbitrator;forsampleclauses,consultSectionV,discussionofPreliminaryRelief.Partiescanprovideforarbitrationoffuturedisputesbyinsertingthefollowingclauseintotheircontracts.

PATENT1 Anycontroversyorclaimarisingoutoforrelatingtothiscontract,orthebreachthereof,shallbesettledbyarbitrationadministeredbytheAmericanArbitrationAssociationunderitsPatentArbitrationRules,andjudgmentontheawardrenderedbythearbitrator(s)maybeenteredbyanycourthavingjurisdictionthereof.

Arbitrationofexistingdisputesmaybeaccomplishedbyuseofthefollowingclause.

PATENT2 We,theundersignedparties,herebyagreetosubmittoarbitrationadministeredbytheAmericanArbitrationAssociationunderitsPatentArbitrationRulesthefollowingcontroversy:(describebriefly).Wefurtheragreethattheabovecontroversybesubmittedto(one)

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(three)arbitrator(s),andthatajudgmentofanycourthavingjurisdictionmaybeenteredontheaward.

Ifpartieswanttoadoptmediationasapartoftheircontractualdisputesettlementprocedure,theycaninsertthefollowingmediationclauseinconjunctionwithastandardarbitrationprovision.

PATENT3 Ifadisputearisesoutoforrelatestothiscontract,orthebreachthereof,andifthedisputecannotbesettledthroughnegotiation,thepartiesagreefirsttotryingoodfaithtosettlethedisputebymediationadminis-teredbytheAmericanArbitrationAssociationunderitsCommercialMediationProceduresbeforeresortingtoarbitration,litigation,orsomeotherdisputeresolutionprocedure.


PATENT4 ThepartiesherebysubmitthefollowingdisputetomediationadministeredbytheAmericanArbitrationAssociationunderitsCommercialMediationProcedures(theclausemayalsoprovideforthequalificationsofthemediator(s),methodofpayment,localeofmeetings,andanyotheritemofconcerntotheparties).

V. Other Provisions That Might Be Considered

ThissectioncontainsvariousprovisionswhichexpanduponandaresupplementaltothebasicdisputeresolutionclausessetforthinSectionsIIIandIV.Thelistingofsuchprovisionsisnotintendedtobeall-inclusiveanddoesnotnecessarilyindicatethattheAAAendorsestheuseofsuchadditionallanguage.TheAAArecognizes,however,thatsomedrafterschoosetoexpandtheirdisputeresolutionclausestoreflectatleastsomeoftheseideas.Sinceitisimportantthatpractitionersbewellinformedwhenmakingchoicesindrafting,thesectionalsosetsforth,whereappropriate,certainoftheprosand


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consofadoptingthevarioussupplementalprovisions.

A.SpecifyingaMethodofSelectionandtheNumberofArbitrators

UndertheAAA’sarbitrationrules,arbitratorsaregenerallyselectedusingalistingprocess.TheAAAcasemanagerprovideseachpartywithalistofproposedarbitratorswhoaregenerallyfamiliarwiththesubjectmatterinvolvedinthedispute.Eachsideisprovidedanum-berofdaystostrikeanyunacceptablenames,numbertheremainingnamesinorderofpreference,andreturnthelisttotheAAA.Thecasemanagertheninvitespersonstoservefromthenamesremainingonthelist,inthedesignatedorderofmutualpreference.Thepartiesmayagreetohaveonearbitratororthree(whichincreasesthecost).Ifpartiesdonotagreeonthenumberofarbitrator(s),itwillbelefttothediscretionofthecasemanager.

Thepartiesmayuseotherarbitratorappointmentsystems,suchastheparty-appointedmethodinwhicheachsidedesignatesonearbitratorandthetwothusselectedappointthechairofthepanel.

TheCommercialArbitrationRulesandtheConstructionIndustryArbitrationRulesprovidethatunlessthepartiesspecificallyagreeinwritingthattheparty-appointedarbitratorsaretobenon-neutral,arbitratorsappointedbythepartiesmustmeettheimpartialityandindependencestandardssetforthwithintherules.Ifpartiesintendthattheirpartyappointedarbitratorsserveinanon-neutralcapacity,thisshouldbeclearlystatedwithintheirclause.

Thearbitrationclausecanalsospecifybynametheindividualwhomthepartieswantastheirarbitrator.However,thepotentialunavailabilityofthenamedindividualinthefuturemayposearisk.

Alloftheseissuesandotherscanbedealtwithinthearbitrationclause.

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Someillustrativeprovisionsfollow.

ARBSEL1 Thearbitratorselectedbytheclaimantandthearbi-tratorselectedbyrespondentshall,withintendaysoftheirappointment,selectathirdneutralarbitrator.Intheeventthattheyareunabletodoso,thepartiesortheirattorneysmayrequesttheAmericanArbitrationAssociationtoappointthethirdneutralarbitrator.Priortothecommencementofhearings,eachofthearbitratorsappointedshallprovideanoathorundertakingofimpartiality.

ARBSEL2 Within15daysafterthecommencementofarbitration,eachpartyshallselectonepersontoactasarbitratorandthetwoselectedshallselectathirdarbitratorwithintendaysoftheirappointment.[Thepartyselectedarbitratorswillserveinanon-neutralcapacity.]Ifthearbitratorsselectedbythepartiesareunableorfailtoagreeuponthethirdarbitrator,thethirdarbitratorshallbeselectedbytheAmericanArbitrationAssociation.

ARBSEL3 Intheeventthatarbitrationisnecessary,[nameofspecificarbitrator]shallactasthearbitrator.

Whenprovidingfordirectappointmentofthearbitrator(s)bytheparties,itisbesttospecifyatimeframewithinwhichitmustbeaccomplished.Also,inmanyjurisdictions,thelawpermitsthecourttoappointarbitratorswhereprivately-agreedmeansfail.Sucharesultmaybetimeconsuming,costly,andunpredictable.Partieswhoseektoestablishanad-hocmethodofarbitratorappointmentmightbewelladvisedtoprovideafallback,suchas,shouldtheparticularprocedurefailforanyreason,“arbitratorsshallbeappointedasprovidedintheAAACommercialArbitrationRules.”

B.ArbitratorQualifications


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Thepartiesmaywishthatoneormoreofthearbitratorsbealawyeroranaccountantoranexpertincomputertechnology,etc.Insomeinstances,itmakesmoresensetospecifythatoneofthreearbitratorsbeanaccountant,forexample,thantoturntheentireproceedingovertothreeaccountants.Sampleclausesprovidingforspecificqualificationsofarbitratorsaresetforthbelow.

QUAL1 Thearbitratorshallbeacertifiedpublicaccountant.

QUAL2 Thearbitratorshallbeapracticingattorney[oraretiredjudge][ofthe[specify]Court].

QUAL3 Thearbitrationproceedingsshallbeconductedbeforeapanelofthreeneutralarbitrators,allofwhomshallbemembersofthebarofthestateof[specify],activelyengagedinthepracticeoflawforatleasttenyears.

QUAL4 Thepanelofthreearbitratorsshallconsistofonecontractor,onearchitect,andoneconstructionattorney.

QUAL5 Thearbitratorswillbeselectedfromapanelofpersonshavingexperiencewithandknowledgeofelectroniccomputersandthecomputerbusiness,andatleastoneofthearbitratorsselectedwillbeanattorney.

QUAL6 Intheeventthatanyparty’sclaimexceeds$1million,exclusiveofinterestandattorneys’fees,thedisputeshallbeheardanddeterminedbythreearbitrators.

Partiesmightwishtospecifythatthearbitratorshouldorshouldnotbeanationalorcitizenofaparticularcountry.Thefollowingexamplescanbeaddedtothearbitrationclausetodealwiththisconcern.

NATLY1 Thearbitratorshallbeanationalof[country].

NATLY2 Thearbitratorshallnotbeanationalofeither[countryA]or[countryB].

NATLY3 Thearbitratorshallnotbeofthenationalityofeitheroftheparties.

C.LocaleProvisions

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Partiesmightwanttoaddlanguagespecifyingtheplaceofthearbitration.Thechoiceoftheproperplacetoarbitrateismostimportantbecausetheplaceofarbitrationimpliesgenerallyachoiceoftheapplicableprocedurallaw,whichinturnaffectsquestionsofarbitrability,procedure,courtinterventionandenforcement.

Inspecifyingalocale,partiesshouldconsider(1)theconvenienceofthelocation(e.g.,availabilityofwitnesses,localcounsel,transportation,hotels,meetingfacilities,courtreporters,etc.);(2)theavailablepoolofqualifiedarbitratorswithinthegeographicalarea;and(3)theapplicableproceduralandsubstantivelaw.Ofparticularimportanceininternationalcasesistheapplicabilityofaconventionprovidingforrecognitionandenforcementofarbitralagreementsandawardsandthearbitrationregimeatthechosensite.

Anexampleoflocaleprovisionsthatmightappearinanarbitrationclausefollows.

LOC1 Theplaceofarbitrationshallbe[city],[state],or[country].

D.Language

Inmattersinvolvingmultilingualparties,thearbitrationagreementoftenspecifiesthelanguageinwhichthearbitrationwillbeconducted.Examplesofsuchlanguagefollow.

LANG1 Thelanguage(s)ofthearbitrationshallbe[specify].

LANG2 Thearbitrationshallbeconductedinthelanguageinwhichthecontractwaswritten.

Sucharbitrationclausescouldalsodealwithselectionandcostallocationofaninterpreter.

E.GoverningLaw


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Itiscommonforpartiestospecifythelawthatwillgovernthecontractand/orthearbitrationproceedings.Someexamplesfollow.

GOV1 ThisagreementshallbegovernedbyandinterpretedinaccordancewiththelawsoftheStateof[specify].Thepartiesacknowledgethatthisagreementevidencesatransactioninvolvinginterstatecommerce.TheUnitedStatesArbitrationActshallgoverntheinterpretation,enforcement,andproceedingspursuanttothearbitrationclauseinthisagreement.

GOV2 DisputesunderthisclauseshallberesolvedbyarbitrationinaccordancewithTitle9oftheUSCode(UnitedStatesArbitrationAct)andtheCommercialArbitrationRulesoftheAmericanArbitrationAssociation.

GOV3 ThiscontractshallbegovernedbythelawsoftheStateof[specify].

Ininternationalcases,wherethepartieshavenotprovidedforthelawapplicabletothesubstanceofthedispute,theAAA’sInternationalArbitrationRulescontainspecificguidelinesforarbitratorsregardingapplicablelaw.SeethediscussionconcerningInternationalDisputes.

F.ConditionsPrecedenttoArbitration

Underanagreementoftheparties,satisfactionofspecifiedconditionsmayberequiredbeforeadisputeisreadyforarbitration.Examplesofsuchconditionsprecedentincludewrittennotificationofclaimswithinafixedperiodoftimeandexhaustionofothercontractuallyestablishedprocedures,suchassubmissionofclaimstoanarchitectorengineer.Thesekindsofprovisionsmay,however,beasourceofdelayandmayrequirelinkagewithastatuteoflimitationswaiver(seebelow).Anexampleofa“conditionprecedent”clausefollows.

CONPRE1 Ifadisputearisesfromorrelatestothiscontract,thepartiesagreethatuponrequestofeitherpartytheywillseektheadviceof[amutuallyselectedengineer]andtryingoodfaithtosettlethedisputewithin30daysofthatrequest,followingwhicheitherpartymaysubmitthemattertomediationundertheCommercialMediation

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ProceduresoftheAmericanArbitrationAssociation.Ifthematterisnotresolvedwithin60daysafterinitiationofmediation,eitherpartymaydemandarbitrationadministeredbytheAmericanArbitrationAssociationunderits[applicable]rules.

G.PreliminaryRelief

WhilepreliminaryreliefispermittedundertheAAA’scommercialrules,itisappropriatetoprovidespecificallyforitifaneedforaninterimremedyisanticipated.OnewaytodosoistoincorporatetheOptionalRulesforEmergencyMeasuresofProtectionoftheAAACommercialArbitrationRulesandMediationProcedures,discussedabove.Alternatively,ifthepartiesforeseethepossibilityofneedingemergencyreliefakintoatemporaryrestrainingorder,theymightspecifyanarbitratorbynameforthatpurposeintheirarbitrationclauseorauthorizetheAAAtonameapreliminaryreliefarbitratortoensureanarbitratorisinplaceinsufficienttimetoaddressappropriateissues.

Specificclausesprovidingforpreliminaryreliefaresetforthbelow.

PRELIM1 Eitherpartymayapplytothearbitratorseekinginjunctivereliefuntilthearbitrationawardisrenderedorthecontroversyisotherwiseresolved.Eitherpartyalsomay,withoutwaivinganyremedyunderthisagreement,seekfromanycourthavingjurisdictionanyinterimorprovisionalreliefthatisnecessarytoprotecttherightsorpropertyofthatparty,pendingtheestablishmentofthearbitraltribunal(orpendingthearbitraltribunal’sdeterminationofthemeritsofthecontroversy).

NotethattheAAA’srulesprovideforinterimreliefbythearbitratoruponapplicationofaparty.

Pendingtheoutcomeofthearbitration,partiesmayagreetoholdinescrowmoney,aletterofcredit,goods,orthesubjectmatterofthearbitration.Asampleofaclauseprovidingforsuchescrowfollows.

ESCROW1 Pendingtheoutcomeofthearbitration[nameofparty]shallplaceinescrowwith[lawfirm,institution,orAAA]


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astheescrowagent,[thesumof____________________,aletterofcredit,goods,orthesubjectmatterindispute].Theescrowagentshallbeentitledtoreleasethe[funds,letterofcredit,goods,orsubjectmatterindispute]asdirectedbythearbitrator(s)intheaward,unlessthepartiesagreeotherwiseinwriting.

H.Consolidation

Wheretherearemultiplepartieswithdisputesarisingfromthesametransaction,complicationscanoftenbereducedbytheconsolidationofalldisputes.Sincearbitrationisaprocessbasedonvoluntarycontractualparticipation,partiesmaynotberequiredtoarbitrateadisputewithouttheirconsent.However,partiescanprovidefortheconsolidationoftwoormoreseparatearbitrationsintoasingleproceedingorpermitthejoinderofathirdpartyintoanarbitration.Inaconstructiondispute,consolidatedproceedingsmayeliminatetheneedforduplicativepresentationsofclaimsandavoidthepossibilityofconflictingrulingsfromdifferentpanelsofarbitra-tors.However,consolidatingclaimsmightbeasourceofdelayandexpense.Anexampleoflanguagethatcanbeincludedinanarbitra-tionclausefollows.

CONSOL1 Theowner,thecontractor,andallsubcontractors,specialtycontractors,materialsuppliers,engineers,designers,architects,constructionlenders,bondingcompanies,andotherpartiesconcernedwiththeconstructionofthestructurearebound,eachtoeachother,bythisarbitrationclause,providedthattheyhavesignedthiscontractoracontractthatincorporatesthiscontractbyreferenceorsignedanyotheragreementtobeboundbythisarbitrationclause.Eachsuchpartyagreesthatitmaybejoinedasanadditionalpartytoanarbitrationinvolvingotherpartiesunderanysuchagreement.Ifmorethanonearbitrationisbegununderanysuchagreementandanypartycontendsthattwoor

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morearbitrationsaresubstantiallyrelatedandthattheissuesshouldbeheardinoneproceeding,thearbitrator(s)selectedinthefirst-filedofsuchproceedingsshalldeterminewhether,intheinterestsofjusticeandefficiency,theproceedingsshouldbeconsolidatedbeforethat(those)arbitrator(s).

I.DocumentDiscovery

UndertheAAArules,arbitratorsareauthorizedtodirectaprehearingexchangeofdocuments.Thepartiestypicallydiscusssuchanexchangeandseektoagreeonitsscope.Inmost(butnotall)instances,arbitratorswillorderpromptproductionoflimitednumbersofdocumentswhicharedirectlyrelevanttotheissuesinvolved.Insomeinstances,partiesmightwanttoensurethatsuchproductionwillinfactoccurandthusprovideforitintheirarbitrationclause.Indoingso,however,theyshouldbemindfulofwhatscopeofdocumentproductiontheydesire.Thismaybedifficulttodecideattheoutset.Ifthepartiesaddressdiscoveryintheclause,theymightincludetimelimitationsastowhenalldiscoveryshouldbecompletedandmightspecifythatthearbitratorshallresolveoutstandingdiscoveryissues.Samplelanguageissetforthbelow.

DOC1 Consistentwiththeexpeditednatureofarbitration,eachpartywill,uponthewrittenrequestoftheotherparty,promptlyprovidetheotherwithcopiesofdocuments[relevanttotheissuesraisedbyanyclaimorcounterclaim][onwhichtheproducingpartymayrelyinsupportoforinoppositiontoanyclaimordefense].Anydisputeregard-ingdiscovery,ortherelevanceorscopethereof,shallbedeterminedbythe[arbitrator(s)][chairofthearbitrationpanel],whichdeterminationshallbeconclusive.Alldiscoveryshallbecompletedwithin[45][60]daysfollowingtheappointmentofthearbitrator(s).

TheAAA’svariouscommercialarbitrationrulesprovideanopportu-


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nityforanadministrativeconferencewiththeAAAstaffand/orapre-liminaryhearingwiththearbitrator.Thepurposesofsuchmeetingsincludeestablishingtheextentofandascheduleforproductionofrelevantdocumentsandotherinformation.

J.Depositions

Generallyarbitratorsprefertohearandbeabletoquestionwitnessesatahearingratherthanrelyondepositiontestimony.However,par-tiesarefreetoprovideintheirarbitrationclauseforatailoreddiscov-eryprogram,preferablytobemanagedbythearbitrator.Thismightoccur,forexample,ifthepartiesanticipatetheneedfordistantwit-nesseswhowouldnotbeabletotestifyexceptthroughdepositionsor,inthealternative,bythearbitratorholdingahearingwherethewitnessislocatedandsubjecttosubpoena.Inmostcaseswherepartiesprovidefordepositions,theydosoinverylimitedfashion,i.e.,theymightspecifya30-daydepositionperiod,witheachsidepermittedthreedepositions,noneofwhichwouldlastmorethanthreehours.Allobjectionswouldbereservedforthearbitrationhearingandwouldnotevenbenotedatthedepositionexceptforobjectionsbasedonprivilegeorextremeconfidentiality.Samplelanguageprovidingforsuchdepositionsissetforthbelow.

DEP1 Attherequestofaparty,thearbitrator(s)shallhavethediscretiontoorderexaminationbydepositionofwitnessestotheextentthearbitratordeemssuchadditionaldiscoveryrelevantandappropriate.Depositionsshallbelimitedtoamaximumof[three][insertnumber]perpartyandshallbeheldwithin30daysofthemakingofarequest.Additionaldepositionsmaybescheduledonlywiththepermissionofthe[arbitrator(s)][chairofthearbitrationpanel],andforgoodcauseshown.Eachdepositionshallbelimitedtoamaximumof[threehours][sixhours][oneday’s]dura-tion.Allobjectionsarereservedforthearbitrationhearingexceptforobjectionsbasedonprivilegeandproprietaryorconfidentialinformation.

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K.DurationofArbitrationProceeding

WhileAAACommercialArbitrationRulesnormallyprovideforanawardwithin30daysoftheclosingofthehearing,partiessometimesunderscoretheirwishforanexpeditedresultbyprovidinginthearbitrationclause,forexample,thattherewillbeanawardwithinaspecifiednumberofmonthsofthenoticeofintentiontoarbitrateandthatthearbitrator(s)mustagreetothetimeconstraintsbeforeacceptingappointment.Beforeadoptingsuchlanguage,however,thepartiesshouldconsiderwhetherthedeadlineisrealisticandwhatwouldhappenifthedeadlinewerenotmetundercircumstanceswherethepartieshadnotmutuallyagreedtoextendit(e.g.,whethertheawardwouldbeenforceable).Itthusmaybehelpfultoallowthearbitratortoextendtimelimitsinappropriatecircumstances.Samplelanguageissetforthbelow.

TIME1 Theawardshallbemadewithinninemonthsofthefilingofthenoticeofintentiontoarbitrate(demand),andthearbitrator(s)shallagreetocomplywiththisschedulebeforeacceptingappointment.However,thistimelimitmaybeextendedbyagreementofthepartiesorbythearbitrator(s)ifnecessary.

L.Remedies

UnderabroadarbitrationclauseandmostAAArules,thearbitratormaygrant“anyremedyorreliefthatthearbitratordeemsjustandequitable”withinthescopeoftheparties’agreement.Sometimespartieswanttoincludeorexcludecertainspecificremedies.Examplesofclausesdealingwithremediesfollow.

REM1 Thearbitratorswillhavenoauthoritytoawardpunitiveorotherdamagesnotmeasuredbytheprevailingparty’sactualdamages,exceptasmayberequiredbystatute.

REM2 Innoeventshallanawardinanarbitrationinitiatedunderthisclauseexceed$________.


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REM3 Innoeventshallanawardinanarbitrationinitiatedunderthisclauseexceed$________foranyclaimant.

REM4 Thearbitrator(s)shallnotawardconsequentialdamagesinanyarbitrationinitiatedunderthissection.

REM5 Anyawardinanarbitrationinitiatedunderthisclauseshallbelimitedtomonetarydamagesandshallincludenoinjunctionordirectiontoanypartyotherthanthedirectiontopayamonetaryamount.

REM6 Ifthearbitrator(s)findliabilityinanyarbitrationinitiatedunderthisclause,theyshallawardliquidateddamagesintheamountof$________.

REM7 Anymonetaryawardinanarbitrationinitiatedunderthisclauseshallincludepre-awardinterestattherateof____%fromthetimeoftheactoractsgivingrisetotheaward.

M.“Baseball”Arbitration

“Baseball”arbitrationisamethodologyusedinmanydifferentcontextsinadditiontobaseballplayers’salarydisputes,andisparticularlyeffectivewhenpartieshavealong-termrelationship.Theprocedureinvolveseachpartysubmittinganumbertothearbitrator(s)andservingthenumberonhisorheradversaryontheunderstandingthat,follow-ingahearing,thearbitrator(s)willpickoneofthesubmittednumbers,nothingelse.Akeyaspectofthisapproachisthatthereisincentiveforapartytosubmitahighlyreasonablenumber,sincethisincreasesthelikelihoodthatthearbitrator(s)willselectthatnumber.Insomeinstances,theprocessofsubmittingthenumbersmovesthepartiessoclosetogetherthatthedisputeissettledwithoutahearing.Samplelanguageprovidingfor“baseball”arbitrationissetforthbelow.

BASEBALL1 Eachpartyshallsubmittothearbitratorandexchangewitheachotherinadvanceofthehearingtheirlast,bestoffers.Thearbitratorshallbelimitedtoawardingonlyoneortheotherofthetwofiguressubmitted.

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N.ArbitrationWithinMonetaryLimits

Partiesareoftenabletonegotiatetoapointbutarethenunabletoclosetheremaininggapbetweentheirrespectivepositions.Byset-tingupanarbitrationthatmustresultinanawardwithinthegapthatremainsbetweentheparties,thepartiesareabletoeliminateextremerisk,whilegainingthebenefitoftheextenttowhichtheirnegotiationsweresuccessful.

Therearetwocommonly-usedapproaches.Thefirstinvolvesinformingthearbitrator(s)thattheawardshouldbesomewherewithinaspeci-fiedmonetaryrange.Samplecontractlanguageprovidingforthismethodologyissetforthbelow.

LIMITS1 Anyawardofthearbitratorinfavorof[specifyparty]andagainst[specifyparty]shallbeatleast[specifyadollaramount]butshallnotexceed[specifyadollaramount].[Specifyaparty]expresslywaivesanyclaiminexcessof[specifyadollaramount]andagreesthatitsrecoveryshallnotexceedthatamount.Anysuchawardshallbeinsatisfactionofallclaimsby[specifyaparty]against[specifyaparty].

Asecondapproachisforthepartiestoagreebutnottellthearbitrator(s)thattheamountofrecoverywill,forexample,besomewherebetween$5and$10.Iftheawardislessthan$5,thenitisraisedto$5pursuanttotheagreement;iftheawardismorethan$10,thenitisloweredto$10pursuanttotheagreement;iftheawardiswithinthe$5-10range,thentheamountawardedbythearbitrator(s)isunchanged.Samplecontractlanguageprovidingforthismethodologyissetforthbelow.

LIMITS2 Intheeventthatthearbitratordeniestheclaimorawardsanamountlessthantheminimumamountof[specify],thenthisminimumamountshallbepaidtotheclaimant.Shouldthearbitrator’sawardexceedthemaximumamountof[specify],thenonlythismaximumamountshallbepaidtotheclaimant.Itisfurtherunderstoodbetweenthepartiesthat,ifthearbitratorawardsanamountbetweentheminimumandthemaximumstipulatedrange,thentheexactawarded


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amountwillbepaidtotheclaimant.Thepartiesfurtheragreethatthisagreementisprivatebetweenthemandwillnotbedisclosedtothearbitrator.

O.AssessmentofAttorneys’Fees

TheAAArulesgenerallyprovidethattheadministrativefeesbeborneasincurredandthatthearbitrators’compensationbeallocatedequallybetweenthepartiesand,exceptforinternationalrules,aresilentconcerningattorneys’fees;butthiscanbemodifiedbyagreementoftheparties.Feesandexpensesofthearbitration,includingattorneys’fees,canbedealtwithinthearbitrationclause.Sometypicallanguagedealingwithfeesandexpensesfollow.

FEE1 Theprevailingpartyshallbeentitledtoanawardofreasonableattorneyfees.

FEE2 Thearbitratorsshallawardtotheprevailingparty,ifany,asdeterminedbythearbitrators,allofitscostsandfees.“Costsandfees”meanallreasonablepre-awardexpensesofthearbitration,includingthearbitrators’fees,administrativefees,travelexpenses,out-of-pocketexpensessuchascopyingandtelephone,courtcosts,witnessfees,andattorneys’fees.

FEE3 Eachpartyshallbearitsowncostsandexpensesandanequalshareofthearbitrators’andadministrativefeesofarbitration.

FEE4 Thearbitratorsmaydeterminehowthecostsandexpensesofthearbitrationshallbeallocatedbetweentheparties,buttheyshallnotawardattorneys’fees.

P.ReasonedOpinionAccompanyingtheAward

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Indomesticcommercialcases,arbitratorsusuallywillnotwriteareasonedopinionexplainingtheirawardunlesssuchanopinionisrequestedbyallparties.Whilesometakethepositionthatreasonedopinionsdetractfromfinalityiftheyfacilitatepost-arbitrationresorttothecourts,partiessometimesdesiresuchopinions,particularlyinlarge,complexcasesorasalreadyprovidedbymostapplicablerulesininternationaldisputes.Ifthepartieswantsuchanopinion,theycanincludelanguagesuchasthefollowingintheirarbitrationclause.

OPIN1 Theawardofthearbitratorsshallbeaccompaniedbyareasonedopinion.

OPIN2 Theawardshallbeinwriting,shallbesignedbyamajor-ityofthearbitrators,andshallincludeastatementsettingforththereasonsforthedispositionofanyclaim.

OPIN3 Theawardshallincludefindingsoffact[andconclusionsoflaw].

OPIN4 Theawardshallincludeabreakdownastospecificclaims.

Q.Confidentiality

WhiletheAAAandarbitratorsadheretocertainstandardsconcerningtheprivacyorconfidentialityofthehearings(seetheAAA-ABACodeofEthicsforArbitratorsinCommercialDisputes,CanonVI),partiesmightalsowishtoimposelimitsonthemselvesastohowmuchinformationregardingthedisputemaybedisclosedoutsidethehearing.Thefollowinglanguagemighthelpservethispurpose.

CONF1 Exceptasmayberequiredbylaw,neitherapartynoranarbitratormaydisclosetheexistence,content,orresultsofanyarbitrationhereunderwithoutthepriorwrittenconsentofbothparties.

Theprecedinglanguagecouldalsobemodifiedtorestrictonlydisclosureofcertaininformation(e.g.,tradesecrets).

R.Appeal


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Thebasicobjectiveofarbitrationisafair,fastandexpertresult,achievedeconomically.Consistentwiththisgoal,anarbitrationawardtraditionallywillbesetasideonlyinegregiouscircumstancessuchasdemonstrablebiasofanarbitrator.Sometimes,however,thepartiesdesireamorecomprehensiveappeal,mostofteninthesettingoflegallycomplexcases.Providingamechanismforsuchanappealassuresthatthelosingpartywilluseit.Whilepartiescanattempttoprovideforanappealinthecourtsystempursuanttotraditionalstandardsofcourtreview,theauthorityismixedastowhethercourtswillacceptappealsfromarbitrationonsuchabasis.Anotherapproachistoprovideforanappealtoanotherpanelofarbitratorswhowouldapplywhateverstandardofreviewthepartiesmightspecify.Setforthbelowisanexampleofarbitrationclauselanguageprovidingforthislattertypeofappeal.

APP1 Within30daysofreceiptofanyaward(whichshallnotbebindingifanappealistaken),anypartymaynotifytheAAAofanintentiontoappealtoasecondarbitraltribunal,constitutedinthesamemannerastheinitialtribunal.Theappealtribunalshallbeentitledtoadopttheinitialawardasitsown,modifytheinitialawardorsubstituteitsownawardfortheinitialaward.Theappealtribunalshallnotmodifyorreplacetheinitialawardexcept[formanifestdisregardoflaworfacts][forclearerrorsoflaworbecauseofclearandconvincingfactualerrors].Theawardoftheappealtribunalshallbefinalandbinding,andjudgmentmaybeenteredbyacourthavingjurisdictionthereof.

S.Mediation-Arbitration

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AclausemayprovidefirstformediationundertheAAA’smediationprocedures.Ifthemediationisunsuccessful,themediatorcouldbeauthorizedtoresolvethedisputeundertheAAA’sarbitrationrules.Thisprocess,issometimesreferredtoas“Med-Arb.”Exceptinunusualcircumstances,aprocedurewherebythesameindividualwhohasbeenservingasamediatorbecomesanarbitratorwhenthemediationfailsisnotrecommended,becauseitcouldinhibitthecandorwhichshouldcharacterizethemediationprocessand/oritcouldconveyevidence,legalpointsorsettlementpositionsexparte,improperlyinfluencingthearbitrator.Asampleofamed-arbclausefollows.

MEDARB1 Ifadisputearisesfromorrelatestothiscontractorthebreachthereof,andifthedisputecannotbesettledthroughdirectdiscussions,thepartiesagreetoendeavorfirsttosettlethedisputebymediationadministeredbytheAmericanArbitrationAssociationunderitsCommercialMediationProceduresbeforeresortingtoarbitration.Anyunresolvedcontroversyorclaimaris-ingfromorrelatingtothiscontractorbreachthereofshallbesettledbyarbitrationadministeredbytheAmericanArbitrationAssociationinaccordancewithitsCommercialArbitrationRules,andjudgmentontheawardrenderedbythearbitratormaybeenteredinanycourthavingjurisdictionthereof.Ifallpartiestothedisputeagree,amediatorinvolvedintheparties’mediationmaybeaskedtoserveasthearbitrator.

T.StatuteofLimitations

Partiesmaywishtoconsiderwhethertheapplicablestatuteoflimitationswillbetolledforthedurationofmediationproceedings,andcanrefertothefollowinglanguage.

STATLIM1 Therequirementsoffilinganoticeofclaimwithrespecttothedisputesubmittedtomediationshallbesuspendeduntiltheconclusionofthemediationprocess.


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U.DisputeResolutionBoards

ADisputeResolutionBoard(DRB)providesaprompt,rational,impartialreviewofdisputesbymutuallyacceptedexperts,whichfrequentlyresultsinsubstantialcostsavingsandcaneliminateyearsofwastedtimeandenergyinlitigation.DRBproceduresmaybemadeapartofconstructioncontractdocuments.

ThecontractshouldcontainaparagraphreflectingtheagreementtoestablishtheDRB.Thetextoftheactualproceduresalsoshouldbephysicallyincorporatedintothegeneralconditionsorsupplementaryconditionsofthecontractforconstructionwhereverpossibleandpractical,andsuchdocumentsastheinvitationtobiddersortherequestforproposalsshouldmentionthattheformationofaDRBiscontemplated.TheDRBproceduresshouldbecoordinatedwiththeotherdisputeresolutionproceduresrequiredbythecontractdocuments.

Suggestedlanguageforincorporationinthecontractfollows.

DRB1 ThepartiesshallimpanelaDisputeResolutionBoardofoneorthreemembersinaccordancewiththeDisputeResolutionBoardGuideSpecificationsoftheAmericanArbitrationAssociation.TheDRB,incloseconsultationwithallinterestedparties,willassistandrecommendtheresolutionofanydisputes,claims,andothercontroversiesthatmightariseamongtheparties.

V.MassTorts

ADRtechniquescanbeemployedprivatelybypartiesfacingthepros-pectofmasstortlitigationtoexploreinanonbindingfashiontheoptionsformanagement,evaluation,and/orresolutionofthedispute.Awiderangeofbindingandnonbindingtechniques,includingneu-tralevaluation,mediation,andarbitrationcanbeusedtoexplorethepotentialforresolutionofadisputeand/ortodevelopabasicframeworkfordiscussions.Althoughtheseoptionshavelimitationsandmaynotbeasubstituteforlitigationwithpossiblefullevidentiarytrials,theycanprovideausefulframeworkforearlydiscussionoftheissues.Thepartiesshouldbeabletoformulateprocedurestoassureconfidentialityandtoprotectagainsttheinappropriateuseofinformation.

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Conclusion

Adisputeresolutionclauseshouldaddressthespecialneedsofthepartiesinvolved.AninadequateADRclausecanproduceasmuchdelay,expense,andinconvenienceasatraditionallawsuit.Whenwritingadisputeresolutionclause,keepinmindthatitspurposeistoresolvedisputes,notcreatethem.Ifdisagreementsariseoverthemeaningoftheclause,itisoftenbecauseitfailedtoaddresstheparticularneedsoftheparties.Useofstandard,simpleAAAlanguagemayavoiddifficulties.DraftinganeffectiveADRagreementisthefirststepontheroadtosuccessfuldisputeresolution.

Afteradisputearises,partiescanrequestanadministrativeconferencewithaAAAcasemanagertoassisttheminestablishingappropriateproceduresnecessaryfortheiruniquecase.Thiscanbedonebeforeoraftermediatororarbitratorselection.Suchconferencescanexpeditetheproceedingsinmanycases.

ThisbrochuredescribeswaysinwhichsomepartieshavemodifiedtheAAA’stime-testedstandardclausetodealwithspecificconcerns.Giventhatcommercialtransactionsvarygreatly,itspurposeisnottourgeuseoftheprovisionscited,butrathertosuggesttherangeofpossibleoptions.ToarriveatthemostsuitableandeffectiveADRclause,partiesshouldconsultlegalcounselforguidanceandadvice.


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Rules, forms, procedures and guides, as well as information about applying for a fee reduction or deferral, are subject to periodic change and updating. To ensure that you have the most current information, see our website at www.adr.org.

©2004, all rights are reserved by the American Arbitration Association.

© 2007 American Arbitration Association, Inc. All rights reserved. These Rules are the copyrighted property of the American Arbitration Association (AAA) and are intended to be used in conjunction with the AAA’s administrative services. Any unauthorized use or modification of these Rules may violate copyright laws and other applicable laws. Please contact 800.778.7879 or [email protected] for additional information.

AAA197-2.5M-7/07

Documents

Drafting Dispute Resolution Clauses€¦ · drafting or adopting any dispute resolution clause, no matter how basic. The second section describes the major features of arbitration,