Brevity in Arbitration Clauses

Every time I review the arbitration clauses in our template agreements, I wonder about the most succint, least ambiguous ,way in which I can draft the arbitration clause.

The standard arbitration provided by the AAA is

Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.

Ken Adams revision (from his blog at http://www.adamsdrafting.com/my-version-of-the-aaa-standard-arbitration-clause/)

As the exclusive means of resolving through adversarial dispute resolution any disputes arising out of this agreement or [describe the subject matter of the contract], a party may demand that any such dispute be resolved by arbitration administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules, and each party hereby consents to any such disputes being so resolved. Judgment on the award rendered in any such arbitration may be entered in any court having jurisdiction.

My revision

Any legal dispute arising from this contract shall be settled by binding arbitration, in the English language, under the Commercial Arbitration Rules of the American Arbitration Association.  The seat of the arbitration shall be the city of Chicago, Illinois.


Why so succint?

We need concise, clear language. We are codifying an agreement between people that need to be understood very easily in the event of a dispute.  When drafting, there are two (among other) competing concepts.

The agreement must

a) faithfully record the nature of the agreement
and
b) must be clear enough so that when the parties return to the record, the parties and the adjudicatory body (court, judge, tribunal) can easily understand the agreement.

In the measurable matters of money, commerce, and dispute resolution, 'b)' is as or more important than 'a)'.

(we could do a Velasquez's "The Surrender at Breda" to really get to the sense of every agreement but I'm pretty crap at drawing and painting so I'll stick to short, baby food, contract language)

So now on to the parts of the clause:

"any legal dispute"

- it is important to refer to all legal disputes between the parties including all claims in tort or any other concept of law. This is to prevent a party trying to get out of arbitration from claiming that this is not a contract issue. (There is the issue of whether the dispute is of a "commercial" nature under the New York Convention but that's a whole other ball of wax.)
- This is also to clearly state that this is the only dispute resolution mechanism. There is no need to use words like "exclusively" as both the New York Convention and Federal Arbitration Act are clear that courts should stay their proceedings in favour of arbitration (if the clause is clear and unambiguous, and the subject matter is arbitrable.)

"arising from"

- I was in two minds on "arising from"and "related to" and rejected "related to" because a dispute may predate the agreement but may be related to it. The arbitration clause covers this agreement not all agreements in eternity between the parties. And "arising from" is a vast scope of disputes.

"binding"

- It is important to state that the process is binding. Parties will do anything to weasel out of an agreement (everything is fair in war and business.)

It is important to avoid words like "may demand" when you are not referring to the granting of some right from one party to another (Party A may attempt to file suit in Burkina Faso against Party B but that right is not B's to give so why mention it in the agreement between them?) No need to say the award is binding or that each party consents. If you say "the Parties agree to binding arbitration," no need for flowery prose on submissions, demands, and consents. Of course, this means the lawyers don't get to interpret and reinterpret the new words.

(and so I remember Shakespeare's Henry VI's view of lawyers.)

In my version, I mention the language and place of arbitration. That is very important in terms of cost and procedural implications. I don't mention the procedural law of the arbitration (the lex arbitri.)It usually follows the place of arbitration and is liable to become another bone of contention with opposing counsel in a negotiation.

You could think round and round about you decision about which procedural law you pick the implication of this or that procedural law but remember- first you have to come to the best decision on a different procedural law for the arbitration, then you have to negotiate it with the other side, and they will wonder why and push back at you and both sides will get bogged down unnecessarily. Instead of all that effort, you could just pick a reasonable, neutral, generally acceptable, place of arbitration, and let the procedural law follow the seat.


Finally, superfluous elements in AAA and Adams clauses:

Adversarial dispute resolution:

       - completely superfluous. If we say binding arbitration, we clearly do not mean "consensual mediation." This is not a mediation-arbitration clause. (Fewer words ---> better!)

Judgement on the award may be entered:

       - entering of awards in courts is regulated by the appropriate statute law, convention and the jurisdiction of the courts. Consenting to the exercise of rights that one cannot prevent the exercise of, is like saying, "Party A may obey the laws of Physics or attempt to fly to Krypton, and Party B consents to the same." If a judgement needs to hang on a particular fact, a judge will find one. There is no need for introducing language asserting jurisdiction one does not have.