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Monday, May 15, 2017

Arbitration: setting the rules and identifying which arbitration organization will be used

When it comes time to go to arbitration for commercial disputes, there can be a whole lot of questions that need answering. Those primary questions usually extend to which organization will conduct the arbitration and which rules will be used. It is important to understand these issues before including this in an arbitration agreement and before moving forward toward arbitration.

One of the most essential components of this process is the arbitration clause in your contract. This is where the name of the arbitration organization can be included and there is also the option to include a set of arbitration rules. Doing so will help to speed up the process and avoid additional legal fees arguing about such things later.

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Setting rules may be the most integral part of arbitration as it establishes the guidelines that will be used. Many arbitration hearings use rules set forth by the American Arbitration Association (AAA). The AAA has a set of streamlined rules for business cases, which are commonly used. It is important to note that not all contracts include AAA or similar rules. In arbitration proceedings that do not specify AAA or similar rules, there can be uncertainty regarding the process. Individuals could find themselves bound by rules that they may not be comfortable with. That is why setting rules in an arbitration clause is extremely beneficial.

On the other hand, there is less flexibility when arbitration clauses are overly specific. So it may be better to leave room in your business contracts, which can demand a bit of a balancing act. When there are discrepancies regarding rules or the arbitration organization, the process of ironing out those details can take up lots of time and money.

Which arbitration organization you choose is an important component to consider. Some arbitration organizations have track records of ruling in favor of certain clients, which could make for an uphill and seemingly unfair battle.

Overall, it’s simply better to cut down on possible disagreements about the logistics or arbitration; reducing the issues to argue over will save time and money. Establishing the rules and the arbitration organization, business lawyer, well before an arbitration is ever needed is advantageous and recommended.