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Education Services | 2

DRAFTING ARBITRATION CLAUESThe Basics and Beyond

WebinarJune 21, 2016

EDUCATION SERVICES

Education Services |

Disclaimer

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This presentation is © 2016 American Arbitration Association, Inc. All rights reserved. No part of this document may be reproduced, transmitted or otherwise distributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying or using any information storage and retrieval system, without written permission from the American Arbitration Association, Inc. Any reproduction, transmission or distribution of this form or any of the material herein is prohibited and is in violation of US and international law. American Arbitration Association, Inc. expressly disclaims any liability in connection with use of this presentation or its contents by any third party.

The views expressed by panelists in this webcast are not necessarily those of the American Arbitration Association, Inc. The American Arbitration Association, Inc. assumes no responsibility for the content and materials presented by speakers during the webcast.


Speaker

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Dani SchwartzRosenberg & Estis, P.C.

New York, New York

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“The object of arbitration is a fair, fast and expert result that is

achieved economically.” – AAA

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At a minimum, every clause drafter should:

Adapted from Drafting Arbitration Clauses: Avoiding the 7 Deadly Sins, by John M. Townsend

• Define what is arbitrable• Bind the parties to

arbitration• Pick a forum and a set of

rules to govern• Specify the governing law• Provide for a reasoned

award• Provide for timing

• Require confidentiality• Consider attorneys’ fees• State that judgment may be

entered on the arbitrator’s award by any federal or state court having jurisdiction (required for enforcement under the federal Arbitration Act)

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Defining what is arbitrable: A particularly poor example

• In case of dispute, the parties agree to submit their claims to arbitration, but in case of litigation, the parties agree to submit their claims to the appropriate court of the State of New York.

Adapted from Drafting Arbitration Clauses: Avoiding the 7 Deadly Sins, by John M. Townsend

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A good start

• Any and all disputes and controversies arising out of or relating to this agreement or the breach thereof shall be resolved in an arbitration administered by the American Arbitration Association, in accordance with the [applicable industry] Rules

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Matter of BRG Sports, LLC v Zimmerman,

2015 NY Slip Op 03066 (1st Dept April 9, 2015)

“The 2010 employment agreement… contains a broad

arbitration provision requiring that ‘[a]ny dispute,

controversy or claim arising out of or relating to this

Agreement, or breach hereof, shall be settled by

arbitration’… and any doubts as to whether the issue is

arbitrable will be resolved in favor of arbitration’”

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Pursuit Investment Management, LLC v Alpha Beta Capital Partners, L.P., 2015 NY Slip Op 03272

(1st Dept April 21, 2015)

“A party will not be compelled to arbitrate … absent evidence which affirmatively establishes that the parties expressly agreed to arbitrate their disputes. The agreement must be clear, explicit and unequivocal.”

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Location of Arbitration

• The place of arbitration shall be New York County

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Governing Law

• The arbitrator shall decide the dispute in accordance with the substantive law of the State of New York

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Reasoned Award

• The arbitrator’s award shall be set forth in a written decision stating the reasons upon which the award is based

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Timing of Arbitration

• The award shall be rendered within X months of the commencement of the arbitration, unless such time limit is extended by the arbitrator.

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How important is it?

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Confidentiality Clause

• Except as required by law, neither a party nor an arbitrator may disclose the existence, content, or results of any arbitration hereunder without the prior written consent of both parties.

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Attorneys’ Fees in Arbitration

• Playing it safe:

– Each party shall bear its own costs, attorneys’ fees and expenses, and an equal share of the arbitrators’ and administrative fees of arbitration

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Attorneys’ Fees in Arbitration

• Going “all in” -- loser pays

– The prevailing party shall be entitled to an award of the arbitrator’s fees, administrative fees, and reasonable attorneys’ fees incurred in connection with the arbitration

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Discovery in Arbitration

• Rule of thumb:

– The more litigation features installed in your arbitration, the fewer benefits the parties are likely to get from arbitration.

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• Discovery alone can account for 50% of litigation costs.

Judicial Conference Adopts Rule Changes, Confronts Projected Budget Shortfalls, THE THIRD BRANCH, Admin. Office of the U.S. Courts (1999)

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Discovery

• Consistent with the expedited nature of arbitration, pre-hearing information exchange shall be limited to the reasonable production of relevant, non-privileged documents, carried out expeditiously.

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Discovery at the Arbitrator’s Discretion

• Any dispute regarding discovery, or the relevance or scope thereof, shall be determined by the arbitrator, which determination shall be conclusive. All discovery shall be completed within X days following the appointment of the arbitrator.

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Depositions

• At the request of a party, the arbitrator shall have the discretion to order examination by deposition of witnesses to the extent the arbitrator deems such additional discovery relevant and appropriate.

• Depositions shall be limited to a maximum of X witnesses per party, shall be conducted for no longer than XX, and shall be held within 30 days of making the request. Each deposition shall be conducted at the offices of the deposing party or their attorney/agent, and the costs of the deposition shall be borne by the deposing party.

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One Arbitrator or Three?

Data & Charts provided by AAA

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One Versus Three Arbitrators

One Arbitrator Three ArbitratorsCases: 57 43Largest Claim:

$128 million $100 million

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One Versus Three Arbitrators

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Questions


Concluding Remarks

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Thank you for attending. Please visit our website at www.aaau.org to see additional program offerings.

Dani Schwartz, Esq.Neutral ID : 4102199

The AAA provides arbitrators to parties on cases administered by the AAA under its various Rules, which delegate authority to the AAA on various issues, including arbitrator appointment and challenges, general oversight, and billing. Arbitrations that proceed without AAA administration are not considered "AAA arbitrations," even if the parties were to select an arbitrator who is on the AAA's Roster.

Dani Schwartz, Esq.Rosenberg & Estis, P.C.

Current Employer-Title Rosenberg & Estis, P.C. – Partner (Litigation)

Profession Attorney

Work History Partner (Litigation), Rosenberg & Estis, P.C., 2008-present; Attorney (Litigation), Warshaw Burstein LLP, 2006-2008; Attorney (Litigation), White & Case LLP, 2004-2006; Law Clerk (pre-bar admission [Litigation]), Krooth & Altman, LLP, 2003.

Experience Partner in the litigation department of Rosenberg & Estis, P.C., an 80-attorney Manhattan law firm. Focuses practice on complex real estate and business litigation, mediation, arbitration, and appeals. Has litigated, arbitrated and mediated the gamut of business and real estate claims, including:

• Landlord/tenant claims (nonpayment of rent, holdover claims, licensee claims, sublease & assignment disputes);• Commercial lease, net lease, and residential lease disputes;• Real estate development disputes;• Hotel and restaurant valuation and appraisal disputes;• Disputes regarding the purchase and sale of real property and corporate assets;• Brokerage commission, financing commission, and finder's fee disputes;• Yellowstone, preliminary and permanent injunctions;• Financial disputes of various kinds, including payment defaults and contract disputes;• Secured transactions and mezzanine loan disputes;• Summary proceedings and special proceedings;• Housing cooperative ("co-op") and condominium disputes;• Contract and tortious interference disputes;• Fraud claims and breaches of fiduciary duty; • Minority and majority partner/shareholder/joint venture business disputes;• Faulty construction and negligence claims;• Mortgage foreclosures, common charge lien foreclosures and other lien foreclosures;• Hedge fund assets, distributions, and liabilities;• Guaranty disputes;• Creditor's rights and bankruptcies;• Promissory notes and breach of contract disputes;• Specific performance disputes;



• Ejectment actions;• Rent regulation (rent stabilization and rent control disputes);• Article 78 proceedings;• RPAPL 881 proceedings;• Attorneys' fees;• Defending class actions and housing discrimination claims;• Restraints on alienation;• Claims of violations of public policy;• Declaratory judgment actions;• Bankruptcy and automatic stay disputes;• Real estate tax and common area maintenance ("CAM") charge disputes;• Operating expense reimbursements;• Title disputes & quiet title claims;• Land use and zoning matters; and• Interim Multiple Dwelling/Loft Law disputes.

Alternative Dispute Resolution Experience

Has served as counsel in arbitrations and mediations relating to real estate, businessdisputes, hospitality and construction, including:• Lease and net lease disputes (representing both landlords and tenants); • Hotel, restaurant and hospitality property valuation and appraisal disputes;• Commercial and residential mortgage disputes (representing lenders and borrowers); • Guaranty enforcement disputes (representing creditors and guarantors); • Cooperative housing corporation ("co-op") and condominium claims; • Financing, "finder's fee" and brokerage commission disputes; • A dispute over whether a net lessee's use of a building zoned for hotel use was a lawful use; • A dispute over whether a restaurant was of the caliber/quality required by its lease; • Real estate construction and development disputes involving neighboring property owners; • Interpretation of easement and license agreements;• Specific performance disputes;• Bankruptcy and financial reorganization mediation; • Waiver (both contractual waiver and waiver through a party's conduct);• Property damage claims;• Class actions;• Housing discrimination;• Commercial signage disputes;• NYC Commission on Human Rights, Office of Mediation and Conflict Resolution; • Claims of wrongful termination of employment; and



• Wrongful death claims.

Alternative Dispute Resolution Training

Arbitrator, William C. Vis International Arbitration Practice Moot Court Competition, Fordham University School of Law (2016) • Writing Quality Decisions, Arbitration Forums, Inc. (2016) • Effective Arbitration: The 10 Most Important Things for Counsel and Arbitrators, AAA (2016) • Recent Developmentsin International Arbitration, Fordham University School of Law (2016) • Writing Quality Decisions in Damage Disputes, Arbitration Forums, Inc. (2016) • The Prologue to an Efficient ADR Proceeding: Key Aspects from the Corporate Perspective, International Institute for Conflict Prevention & Resolution (2016) • International Arbitration & Cross Border Business Transactions: Making the Right Choices, ICC International Court of Arbitration / Case Western Reserve UniversitySchool of Law (2016 webcast) • Using Experts in International Arbitration: Different Circumstances, Different Rules, International Chamber of Commerce & Mayer Brown LLP (2016) • Enforcing Arbitral Awards and Judgments Against Foreign Entities, Gibson, Dunn & Crutcher LLP (2016) • International Arbitration in the Energy Sector: Joint Operating Agreement Disputes, Mayer Brown (2016) • Setting the Record Straight: The Supreme Court and 21st Century Arbitration, PaceLaw School (2016, pre-recorded seminar) • Cross-Cultural Mediation: American and European Perspectives, International Institute for Conflict Prevention & Resolution and Foley Hoag LLP (2016) • Effective Mediators and Non-Verbal Communication, ACRGNY (2016) • European and International Arbitration 101 - What US Counsel Need to Know, Wragge Lawrence Graham & Co. LLP (2016) • International Arbitration: When Third-Party Funders Meet Requests for Costs and Security for Costs, NYIAC (2016) • Finding the Sweet Spot for On-line Dispute Resolution, ARS (2016) • Mediation Insights: What is Going on in the Other Room? UWWM Mediation Group & University of Florida (2016 webinar) • International Arbitration Boot Camp: Third-Party Funding of International Arbitration and Litigation, Baker & Hostetler LLP (2016) • Mediating and Settling Nursing Home Cases, NACLE (2016) • Dispute Resolution in Ireland and New York, Hogan Lovells LLP/NYSBA (2016) • Arbitration Fundamentals and Best Practices for New AAA Arbitrators, AAA (2015) • AAA Arbitration Awards: Safeguarding, Deciding & Writing Awards, AAA (2015) • AAA Commercial Arbitration Rules - Orientation to Revisions, AAA (2015) • Arbitration Fundamentals Home Study, AAA (2015) • Cost-effective Arbitration, AAA & Today's General Counsel (2015) (panelist) • International Arbitration Bootcamp: Planning and Protecting Your Projects Through International Contracts – Beyond the Boilerplate, Baker & Hostetler (2015 recorded seminar) • The Mediation Option in International Commercial Arbitration, University of Florida Institute for Dispute Resolution (2015) • Use of Subpoenas in Arbitration and their Enforcement, National Academy of Continuing Legal Education (2015) • Business ADR for Lawyers, NACLE (2015) • Issues Arising in Arbitration, NACLE (2015) • Securities Arbitration & Mediation, NACLE (2015) • Mediation Techniques and



Practice, NACLE (2015) • Court-Annexed Mediation, New York Law School (2015 recorded seminar) • How Mediators Think, New York Law School (2015 recorded seminar) • Managing and Resolving Disputes Over the Internet: Now Entering the Mainstream, New York Law School (2015 recorded seminar) • Resolving Cross-Border Commercial Disputes Through Mediation: Challenges to Quality, New York Law School (2015 recorded seminar) • Laws of Arbitration as itApplies to Rabbinical Courts, NACLE (2015) • Applying Mediation Principles to Family Law Issues, NACLE (2015) • Negotiating Skills for Lawyers: How to Win Gracefully, NACLE (2015) • Ethics in Mediation and Settlement Negotiations, Rosenberg & Estis, P.C. (2011).

Professional Licenses Admitted to Bar: New York, 2004; SDNY, 2006; EDNY, 2012; Second Circuit Court of Appeals, 2015.

Professional Associations

Young Arbitrators Forum, International Chamber of CommerceDispute Resolution Section of New York State Bar Association (NYSBA)Committee on Arbitration, Dispute Resolution Section of NYSBAInternational Center for Dispute Resolution, Young & International

Education Cornell University (BA - 2000)George Washington University Law School (JD - 2003)

Publications and Speaking Engagements

• "RPAPL § 881: Litigating Access to Neighboring Property," Outside Counsel column (author), New York Law Journal, May 16, 2016;• "Open Issues in RPAPL § 881 Litigation: Accessing Neighboring Property," Outside Counsel column (author), New York Law Journal, April 19, 2016;• AAA (Faculty), Real Estate Arbitration Law & Practice (May 2016);• Association for Conflict Resolution 2016 National Conference (Faculty), Streamlining Dispositive Motion Practice in Arbitration (September 2016 - forthcoming);• AAA (Faculty), Drafting Arbitration Clauses (May 2016);• AAA webinar (Faculty), Arbitration Clause Drafting (June 21, 2016 [forthcoming]); • "Standard Lease Does Not Shield Landlord in Dispute, Panel Says," New York Law Journal, May 17, 2016 (quoted);• "Panel Says Judge was Wrong to Postpone License Fee," New York Law Journal,April 21, 2016 (quoted);• AAA (Faculty), Drafting a Sound Arbitration Clause and Streamlining your Arbitration Process (2015);• AAA (Faculty), Drafting Arbitration Clauses: the Basics and Beyond (2015);• "Lawyers Land Cost Victory for Co-op," Real Estate Weekly, March 2015 (featured);• "It's Complicated - Untangling New York's Super-Confusing Rent Regulation Laws," Super Lawyers Magazine (October, 2015) (quoted).



Awards and Honors New York Metro Super Lawyers Rising Stars 2013, 2014, 2015, 2016.

Willing to serve without travel cost

Yes

Languages EnglishLocale New York, New York, United States of America

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.

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