Drafting Effective Arbitration Clauses

Drafting Effective Arbitration Clauses

Arbitration as means to resolve disputes is growing in use around the world and is a favored method of dispute resolution in certain industries, such as in international construction contracts. In business it is often expressly consented-to as a more timely and less expensive vehicle for dispute resolution than litigation. Ally Law member firms have practitioners deeply experienced in the arbitration process and in positioning your company to engage in effective arbitration. Member firm Moye White, based in Denver, Colorado, has prepared a primer for consideration when drafting an arbitration provision. As a base proposition, “[w]hen drafting an arbitration provision, it is important to remember the key questions… Who, What, Where, When and Why?”

Ally Law Arbitration

Arbitration clauses can be flexible to meet your needs, but to protect your business certain provisions must be carefully thought through. While it may seem self-evident, businesses should define and specify which parties should participate in arbitration in the arbitration clause itself. Although most contracts bind the contracting parties to arbitration, other associated parties should be included or excluded from any arbitration to meet your business’s needs. Further, consideration of your particular industry, your business needs, and your areas of potential conflict may disclose that not every type of dispute should be subject to arbitration. You should define and exclude from the arbitration clause the types of disputes where the right to go to court, particularly for preliminary injunctive relief, needs to be preserved. Too often, clients include boilerplate arbitration clauses in contracts only to learn after dispute has arisen that the arbitration is not the best forum for their dispute, for instance in the case of intellectual property theft.

In addition, the limited appeal rights available after arbitration may create additional risks to a business. Before committing to an arbitration clause of any kind, you should take a hard look at what types of disputes may be on the horizon and how you wish to handle those disputes. Consult your Ally Law member firm attorney to review your business to determine if an arbitration clause is right for any particular contractual transaction, and what are the most beneficial provisions for your needs. For more information about Ally Law member firm services in this area, contact us at team@ally-law.com.

Click here for the original article by Ally Law member Moye White, LLP.

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