Which Principle is Crucial When Drafting An Arbitration Agreement?

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    Which Principle is Crucial When Drafting An Arbitration Agreement?

    When it comes to the art of drafting arbitration agreements, principles can vary widely among experts and practitioners. A Franchise Mediator and Arbitrator insists on including an arbitrator's jurisdiction clause, setting a professional precedent. Alongside this expert perspective, we've gathered additional answers, such as the importance of setting clear arbitration timelines, to provide a rounded understanding of the key principles upheld in the field.

    • Include Arbitrator's Jurisdiction Clause
    • Define Arbitration Scope Precisely
    • Specify Confidentiality Rules Clearly
    • Determine Applicable Law and Jurisdiction
    • Specify Arbitrator Selection Process
    • Set Clear Arbitration Timelines

    Include Arbitrator's Jurisdiction Clause

    Arbitration agreements can be detailed and complex, or standardized by arbitration associations. Local law may require certain provisions, or limit the opportunity to include certain provisions. While there may be certain sections of an arbitration agreement that are desirable by principle, there is one that should always be included in an arbitration agreement to take advantage of the arbitrator's discretion. Some of the compelling advantages of choosing arbitration as a dispute resolution method are that it can be completed much faster than litigation, many of the delaying tactics of litigation can be limited, and it is confidential.

    By including a provision in the agreement that the arbitrator has jurisdiction to hear and decide procedural motions, determine issues of evidence, hear and make decisions on interim relief, such as injunctions, and determine costs to be awarded, the fundamental principle will be followed, and the arbitration can take less time, be more focused on the evidence and facts, and allow the arbitrator to render a decision that is less likely to be appealed.

    Frank Zaid
    Frank ZaidFranchise mediator, arbitrator, business operations consultant, expert witness, ADR Chambers, Toronto, Canada

    Define Arbitration Scope Precisely

    When creating an arbitration agreement, defining the scope of what issues the arbitration will cover is essential. This means being as precise as possible about the disputes that the arbitrator will have the power to resolve. If the scope is too broad or vague, it can lead to unnecessary complications and delays because parties could argue about which matters should be arbitrated.

    Conversely, a very narrow scope could omit important issues, rendering the arbitration less effective. To ensure clarity, review the scope with all parties involved, and amend it if necessary before finalizing the agreement.

    Specify Confidentiality Rules Clearly

    For those drafting an arbitration agreement, one of the critical principles is to ensure all confidentiality rules are written out clearly. Because arbitration proceedings are private, the parties involved often expect discretion, seeking to protect sensitive information from becoming public. The agreement should therefore explicitly describe what information is to be kept confidential, who has access to it, and the consequences of breaching confidentiality.

    This is pivotal to uphold the integrity of the arbitration process and the trust of the parties involved. It's wise to carefully discuss and define these provisions before signing the agreement.

    Determine Applicable Law and Jurisdiction

    Determining the applicable law and jurisdiction before entering into an arbitration agreement is a pivotal step. This aspect dictates the legal context in which the arbitration will occur, and it impacts every facet of the dispute resolution process, including the enforceability of the arbitral award. The agreement should single out which country's or state's law will apply, and which courts will have supervisory jurisdiction over the arbitration.

    It's important to select a legal framework that is fair and acceptable to all parties. Before finalizing the agreement, ensure this is explicitly agreed upon and recorded.

    Specify Arbitrator Selection Process

    In the architecture of an arbitration agreement, specifying the number and process for selecting arbitrators is extremely important. This clause determines the structure of the arbitral tribunal, which can range from a sole arbitrator to a panel of multiple arbitrators. The method of their selection is equally important, as it can affect the neutrality and expertise of the panel – it should be agreed upon by all parties to prevent later disputes about impartiality or qualifications.

    Draft a clear and concise section in the agreement addressing this matter to set a fair tone for conflict resolution. Entering into arbitration without this forethought can lead to unanticipated challenges, so take the time to consider and agree upon these details early.

    Set Clear Arbitration Timelines

    Setting a timeline for completing the arbitration process is a fundamental principle that cannot be overlooked when drafting an arbitration agreement. This timeline creates a structured schedule that aims to prevent delays and promotes efficiency in resolving disputes. It gives both parties a clear expectation for how long the process should take, from the filing of initial claims to the rendering of the final decision.

    Including a well-defined timeline can also encourage a more cost-effective process. Before engaging in arbitration, agree on reasonable timeframes to avoid unnecessary prolongation of conflict.